Predicting Growth Components ¨C Unemployment, Housing Prices and Consumption Using Both Government and Corporate Yield Curves

Dan Saar and Yossi Yagil

International Journal of Economics and Finance, 2018, vol. 10, issue 6, 180-192

Abstract: In this study, we predict changes in specific segments of economic growth including the unemployment rate, the housing prices and changes in personal consumption by employing corporate and government bonds. Our hypothesis is that the use of yield curves of corporate bonds will improve the predictions over previous models that used only the yield curves of government bonds. Our results support that contention. We find that corporate bonds¡¯ spreads actually help predicting the changes in both the unemployment rate and housing prices. We also find a significant positive relationship between bond spreads and future changes in personal consumption levels, but the results are weaker than in the other two segments. One additional finding worth noting is that government bonds are better predictors for the long-term, whereas corporate bonds are better indicators for the short-term.

Keywords: bond yields; housing prices; unemployment rates; consumption; forecasting; corporate bonds (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:10:y:2018:i:6:p:180-192

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