EconPapers    
Economics at your fingertips  
 

Yield spread and the income distribution

Edmond Berisha

The Quarterly Review of Economics and Finance, 2017, vol. 65, issue C, 363-377

Abstract: The yield spread is known to be closely related with business cycles identified by the National Bureau of Economic Research. It is low near peaks and high near troughs. This paper builds on this known relationship and examines the response of the income distribution in the U.S. due to variation in the yield spread. The purpose is to identify the significance and sign of the impact changes in economic conditions have on the distribution of income over the period 1927–2011. Clark and McCracken’s (2001) 1-step ahead encompassing tests from nested linear models are initially estimated to determine the predictive power of the yield spread on the distribution of income. Results strongly reject the null hypothesis that the yield spread has no predictive content for changes in the distribution of income. Specifically, increases in the yield spread are found to correspond with subsequent increases in top income shares.

Keywords: Yield spread; Income inequality; Expected returns (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976916301703
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:65:y:2017:i:c:p:363-377

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Series data maintained by Dana Niculescu ().

 
Page updated 2017-10-28
Handle: RePEc:eee:quaeco:v:65:y:2017:i:c:p:363-377