How Does Yield Curve Predict GDP Growth? A Macro-Finance Approach Revisited
AbstractThis note analyzes the yield-curve predictability for GDP growth by modifying the time-series property of the interest rate process in Ang, Piazzesi, and Wei (2006). When interest rates have a unit root and term spreads are stationary, the short ratefs forecasting role changes, and the combined information from the short rate and term spread intuitively reveals the relationship between the shift of yield curves and GDP growth.
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Bibliographic InfoPaper provided by Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo in its series CARF F-Series with number CARF-F-237.
Length: 19 pages
Date of creation: Nov 2010
Date of revision: Jan 2011
Other versions of this item:
- Junko Koeda, 2012. "How does yield curve predict GDP growth? A macro-finance approach revisited," Applied Economics Letters, Taylor and Francis Journals, vol. 19(10), pages 929-933, July.
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- Huseyin Kaya, 2013. "On the Predictive Power of Yield Spread for Future Growth and Recession: The Turkish Case," Working Papers 010, Bahcesehir University, Betam, revised Mar 2013.
- Roman Horvath, 2012. "Do Confidence Indicators Help Predict Economic Activity? The Case of the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(5), pages 398-412, November.
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