Yield curve inversion and recession

This paper attempts to study why an inverted yield curve may be a leading indicator of recession. It employs an IS-LM model with term structure of interest rates and provides a formal analysis to explain how an adverse shock may cause yield-curve inversion and then a subsequent recession.  It shows that the incidence of inverted yield curve is an off-equilibrium phenomenon in the adjustment process of interest rate and output after an adverse shock. It also explains why yield-curve inversion may only lead, but cannot lead to, a recession.