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Does High Yield Spread Dampen Economic Growth?

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  • Yutaka Kurihara

Abstract

This article focuses on the empirical relationship between the United States’ and Japan’s yield spread of interest rates and economic growth in Japan. The yield spread is defined in this article as the difference between the Japanese government bond yield minus the US government bond yield. Some studies have tackled this issue and found a negative relationship between the yield spread and economic growth; however, recent studies have shown no or a weak relationship. This problem has not yet reached consensus in spite of its importance. As the Japanese interest rate has been quite low since the adoption of the zero interest rate policy at the end of 1990s, the situation may change the results. The empirical results show that reliability of yield spread as a leading indicator of output growth exists in Japan; however, term structure of interest rate is not related to output growth.

Suggested Citation

  • Yutaka Kurihara, 2014. "Does High Yield Spread Dampen Economic Growth?," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 3(2), pages 01-09, April.
    • Handle: RePEc:rbs:ijfbss:v:3:y:2014:i:2:id:394
    DOI: 10.20525/ijfbs.v3i2.180
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    References listed on IDEAS

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    4. 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.
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