The policy content of the yield curve slope

Edward N. Gamber

Review of Financial Economics, 1996, vol. 5, issue 2, 163-179

Abstract: The slope of the yield curve, defined as the difference between 10 year and 3 month government bond yields, has been shown to predict both inflation and real economic activity. This paper investigates whether the forecasting ability of the yield curve slope is solely due to its relationship to monetary policy or whether it contains independent information about the future course of inflation and output growth. The predictive content of the yield curve slope is measured over three separate monetary policy regimes. The empirical results suggest that the yield curve slope contains independent predictive information about a variable only when the Federal Reserve does not react to changes in that variable.

Date: 1996
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https://doi.org/10.1016/S1058-3300(96)90013-0

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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:5:y:1996:i:2:p:163-179

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