How Stable is the Forecasting Performance of the Yield Curve for Output Growth?*

Raffaella Giacomini () and Barbara Rossi

Oxford Bulletin of Economics and Statistics, 2006, vol. 68, issue s1, 783-795

Abstract: We provide an extensive evaluation of the predictive performance of the US yield curve for US gross domestic product growth by using new tests for forecast breakdown, in addition to a variety of in‐sample and out‐of‐sample evaluation procedures. Empirical research over the past decades has uncovered a strong predictive relationship between the yield curve and output growth, whose stability has recently been questioned. We document the existence of a forecast breakdown during the Burns–Miller and Volker monetary policy regimes, whereas during the early part of the Greenspan era the yield curve emerged as a more reliable model to predict future economic activity.

Date: 2006
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https://doi.org/10.1111/j.1468-0084.2006.00456.x

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Working Paper: How Stable is the Forecasting Performance of the Yield Curve for Outpot Growth? (2005)
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