Can US Wage Increases be Regarded as a Leading Indicator for Bond Rates?

Ekin Ayse Ozsuca Erenoglu () and Elif Oznur Acar ()
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Ekin Ayse Ozsuca Erenoglu: Department of Economics, Cankaya University
Elif Oznur Acar: Department of Economics, Cankaya University

World Journal of Applied Economics, 2020, vol. 6, issue 2, 169-176

Abstract: After the subprime meltdown, the Federal Reserve focused its attention on US non-farm payroll data in order to pave the way for its fund rate hikes. As time went by, the Federal Reserve deemed particularly one sub-component of this data, namely the increments on average weekly wage growth as a proxy for inflation and thus a plausible explanation for raising the interest rates. In that aspect, we decide to elaborate on this issue further and examine whether this implemented strategy indeed had a reflection in the real market. For doing so, we intend to determine whether there is any causality relation in either direction between US average weekly wage increases and 10-year Treasury Bond rates. We utilize the Toda-Yamamoto causality approach and come up with a statistically significant result between wages and bond rates. For robustness, we also consider the unemployment rate and consumption expenditures as independent variables.

Keywords: Wage increases; Bond rates; Granger causality (search for similar items in EconPapers)
JEL-codes: C58 E24 G12 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ana:journl:v:6:y:2020:i:2:p:169-176

DOI: 10.22440/wjae.6.2.5

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