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The Relation between the Term Structure of Interest Rates and Canadian Economic Growth

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  • Campbell R. Harvey

Abstract

The Canadian bond market contains valuable information about the future real economic growth. These forecasts, which are based on a simple asset-pricing theory, are more accurate than the ones based on time-series models and compare favorably with professional forecasts. Significantly, the term structure of interest rates in Canada can forecast Canadian economic growth over and above the information contained in the U.S. term structure. In addition, evidence is presented that suggests that the Canadian term structure contains information relevant for forecasting the part of Canadian economic growth that is unrelated to the U.S. business cycle.

Suggested Citation

  • Campbell R. Harvey, 1997. "The Relation between the Term Structure of Interest Rates and Canadian Economic Growth," Canadian Journal of Economics, Canadian Economics Association, vol. 30(1), pages 169-193, February.
  • Handle: RePEc:cje:issued:v:30:y:1997:i:1:p:169-93
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