What does the yield curve tell us about GDP growth?
Andrew Ang () and
Monika Piazzesi ()
Proceedings, 2003, issue mar
A lot, including a few things you may not expect. Previous studies find that the term spread forecasts GDP but these regressions are unconstrained and do not model regressor endogeneity. We build a dynamic model for GDP growth and yields that completely characterizes expectations of GDP. The model does not permit arbitrage. Contrary to previous findings, we predict that the short rate has more predictive power than any term spread. We confirm this finding by forecasting GDP out-of-sample. The model also recommends the use of lagged GDP and the longest maturity yield to measure slope. Greater efficiency enables the yield-curve model to produce superior out-of-sample GDP forecasts than unconstrained OLS at all horizons.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (61) Track citations by RSS feed
Downloads: (external link)
Journal Article: What does the yield curve tell us about GDP growth? (2006)
Working Paper: What Does the Yield Curve Tell us about GDP Growth? (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfpr:y:2003:i:mar:x:4
Ordering information: This journal article can be ordered from
Access Statistics for this article
More articles in Proceedings from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library ().