yield predictability EM anonym revision2 v5.pdf (406.51 kB)
The predictive power of the yield spread for future economic expansions: Evidence from a new approach
journal contribution
posted on 2018-09-20, 14:17 authored by Bartosz Gebka, Mark WoharWe investigate the predictive power of the yield spread for future economic growth. The novel approach adopted here is to utilise its predictive ability for the whole distribution of future growth, rather than predicting the center of this distribution directly. Our results confirm previous findings that the yield spread does contain additional information about the future GDP growth, which varies over time. Most importantly, utilising the information contained in the whole conditional distribution of predicted GDP growth, rather than concentrating on the center of it, provides additional forecasting power for shorter (3–9 months) horizons. This approach is also superior in forecasting future expansionary phases, notably a more common phenomenon than recessions for which the traditional, OLS-based forecasts seem to perform better.
History
School
- Business and Economics
Department
- Business
Published in
Economic ModellingCitation
GEBKA, B. and WOHAR, M.E., 2018. The predictive power of the yield spread for future economic expansions: Evidence from a new approach. Economic Modelling, 75, pp.181-195.Publisher
© ElsevierVersion
- AM (Accepted Manuscript)
Publisher statement
This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/Acceptance date
2018-06-18Publication date
2018Notes
This paper was accepted for publication in the journal Economic Modelling and the definitive published version is available at https://doi.org/10.1016/j.econmod.2018.06.018ISSN
0264-9993Publisher version
Language
- en