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The Information Content of the Term Structure of Interest Rates: Theory and Practice

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  • Frank Browne

    (OECD)

  • Paolo Manasse

    (OECD)

Abstract

The paper is devoted to an empirical examination of the information content in the term structure of nominal interest rates for future inflation. Tests of the ability of the term structure to forecast future changes in the inflation rate are carried out for six major OECD countries using monthly data. These tests demonstrate that the term structure does have considerable forecasting ability, particularly for rates taken from the short end of the maturity spectrum. However, with one exception, forecasting power tends to fade or disappear completely when the term structure in question is formed using yields on increasingly distant maturities as the long rate. This suggests that changes in the nominal term structure using such rates reflect mostly changes in the term structure of (ex post) real interest rates ... Souplesse de la production et inflation : Étude globale Cette étude porte sur la "ventilation" des variations de la croissance du revenu nominal entre la croissance réelle et l'inflation. Elle présente une analyse descriptive des données de la période d'après-guerre ainsi qu'une analyse par régression qui postule l'existence d'une ventilation dynamique stable. Cette analyse a été effectuée pour tous les pays Membres de l'OCDE. On admet en général que les pouvoirs publics ont la possibilité de maîtriser l'évolution du revenu nominal encore que l'étude présente également quelques données relatives aux rapports entre l'inflation et la croissance du revenu nominal et de la masse monétaire. On examine aussi le rôle des anticipations et de l'incertitude et leurs rapports avec l'action des pouvoirs publics ...

Suggested Citation

  • Frank Browne & Paolo Manasse, 1989. "The Information Content of the Term Structure of Interest Rates: Theory and Practice," OECD Economics Department Working Papers 69, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:69-en
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    File URL: http://dx.doi.org/10.1787/748671027822
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    Cited by:

    1. Norbert Funke, 1997. "Predicting recessions: Some evidence for Germany," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(1), pages 90-102, March.
    2. Putkuri, Hanna, 2003. "Cross-country asymmetries in euro area monetary transmission : The role of national financial systems," Research Discussion Papers 15/2003, Bank of Finland.
    3. Jondeau, E. & Ricart, R., 1999. "The Information Content of the French and German Government Bond Tield Curves: Why Such Differences?," Working papers 61, Banque de France.
    4. Christian Mose Nielsen, 2005. "The information content of the term structure of interest rates about future inflation – an illustration of the importance of accounting for a time-varying real interest rate and inflation risk premiu," Money Macro and Finance (MMF) Research Group Conference 2005 86, Money Macro and Finance Research Group.
    5. Jim Day & Ron Lange, 1997. "The Structure of Interest Rates in Canada: Information Content about Medium-Term Inflation," Staff Working Papers 97-10, Bank of Canada.
    6. Hanna Putkuri, 2004. "Cross-country asymmetries in euro area monetary transmission: the role of national financial systems," Macroeconomics 0404037, EconWPA.

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