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The predictive content of the interest rate term spread for future economic growth

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Author Info
Michael Dotsey
Abstract

The interest rate term spread contains useful information for predicting both economic activity and the probability of recessions. Further, the spread contains information not already included in past economic growth and past monetary policy. Nevertheless, the spread's forecasting performance, while still useful, has shown a noticeable deterioration in recent years.

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File URL: http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/summer1998/dotsey.pdf
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Article provided by Federal Reserve Bank of Richmond in its journal Economic Quarterly.

Volume (Year): (1998)
Issue (Month): Sum ()
Pages: 31-51
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Handle: RePEc:fip:fedreq:y:1998:i:sum:p:31-51

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Keywords: Interest rates Forecasting

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May. [Downloadable!] (restricted)
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  2. Robert D. Laurent, 1988. "An interest rate-based indicator of monetary policy," Economic Perspectives, Federal Reserve Bank of Chicago, issue Jan, pages 3-14.
  3. Joseph G. Haubrich & Ann M. Dombrosky, 1996. "Predicting real growth using the yield curve," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 26-35. [Downloadable!]
  4. Catherine Bonser-Neal & Timothy R. Morley, 1997. "Does the yield spread predict real economic activity? : a multicountry analysis," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 37-53. [Downloadable!]
  5. Estrella, Arturo & Hardouvelis, Gikas A, 1991. " The Term Structure as a Predictor of Real Economic Activity," Journal of Finance, American Finance Association, vol. 46(2), pages 555-76, June. [Downloadable!] (restricted)
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  6. Sharon Kozicki, 1997. "Predicting real growth and inflation with the yield spread," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 39-57. [Downloadable!]
  7. Michael Dueker, 1997. "Strengthening the case for the yield curve as a predictor of U.S. recessions," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 41-51. [Downloadable!]
  8. Stock, J.H. & Watson, M.W., 1989. "New Indexes Of Coincident And Leading Economic Indicators," Papers 178d, Harvard - J.F. Kennedy School of Government.
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  9. Estrella, Arturo & Mishkin, Frederic S., 1997. "The predictive power of the term structure of interest rates in Europe and the United States: Implications for the European Central Bank," European Economic Review, Elsevier, vol. 41(7), pages 1375-1401, July. [Downloadable!] (restricted)
  10. Diebold, Francis X & Mariano, Roberto S, 1995. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 253-63, July.
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  11. Plosser, Charles I. & Geert Rouwenhorst, K., 1994. "International term structures and real economic growth," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 133-155, February. [Downloadable!] (restricted)
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