In addition, the relationship between the yield curve and future economic growth may have weakened in recent decades because the decline in inflation, the dropoff in the variance of economic growth since the mid-1980s, and financial innovation may have altered the sensitivity of households and businesses to changes in rates.
Indeed, in simple regression models estimated with recent data, a change in the slope of the term structure has a smaller effect on economic growth than when the models are estimated with data taken from a longer sample period. And models using the more recent data anticipate more rapid real GDP growth in coming quarters than do models using the longer sample period.