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When does the yield curve contain predictive power? Evidence from a data-rich environment

Listed author(s):
  • Jari Hännikäinen

    (School of Management, University of Tampere)

This paper analyzes the predictive content of the level, slope and curvature of the yield curve for U.S. real activity in a data-rich environment. We find that the slope contains predictive power, but the level and curvature are not successful leading indicators. The predictive power of each of the yield curve factors fluctuates over time. The results show that economic conditions matter for the predictive ability of the slope. In particular, inflation persistence emerges as a key variable that affects the predictive content of the slope. The slope tends to forecast output growth better when inflation is highly persistent.

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File URL: http://urn.fi/URN:ISBN:978-952-03-0108-8
File Function: First version, 2016
Download Restriction: no

Paper provided by University of Tampere, School of Management, Economics in its series Working Papers with number 1603.

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Length: 44 pages
Date of creation: Apr 2016
Handle: RePEc:tam:wpaper:1603
Contact details of provider: Web page: http://www.uta.fi/jkk/en/

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