The Term Spread and GDP Growth in Australia
AbstractThis article analyses the significance of the spread between short- and long-term interest rates for predicting GDP growth in Australia, and whether the predictive relation deteriorates, as theory suggests, with the adoption of a credible inflation-targeting regime. We test whether the significance of the term spread is sensitive to the inclusion of other conditioning variables which may be useful in forecasting GDP growth, and whether forecasting significance is due primarily to the expected change in short-term interest rates, the term premium, or a combination of the two. There is some support for the proposition that the rationally-expected term spread has become less significant with the adoption of inflation targeting. Copyright © 2009 The Economic Society of Australia.
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Bibliographic InfoArticle provided by The Economic Society of Australia in its journal Economic Record.
Volume (Year): 85 (2009)
Issue (Month): 269 (06)
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Other versions of this item:
- Jacob Poke & Graeme Wells, 2007. "The Term Spread and GDP Growth in Australia," Working Papers 2508, University of Tasmania, School of Economics and Finance, revised Nov 2007.
- Jacob Poke & Graeme Wells, 2007. "The Term Spread And Gdp Growth In Australia," CAMA Working Papers 2007-27, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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- Watson, John & Wickramanayake, J., 2012. "The relationship between aggregate managed fund flows and share market returns in Australia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(3), pages 451-472.
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