Also Sprach Analyst has a post (here) about China’s slowdown showing through the lack of loan demand and inverted yield curves. The post’s comment about yield curve reminds me of this paper by Jonathan Wright, now professor at Johns Hopkins: The Yield Curve and Predicting Recessions.
Of course, the idea is not new. Here is an older paper written 10 years before Professor Wright’s doing a very similar analysis: The Yield Curve as a Predictor of U.S. Recessions.
To calculate US recession probability is easy enough, because the needed data are publicly available. You can get almost all the data from FRED (here) alone. For China, it is a bit more difficult. In addition to the difficulty in obtaining the data for your regression model, you won’t have much recession observations. China has very few recessions, particular over the period where yield data are available. The graph below shows China’s real GDP growth rate (data source here).
