The Corporate Spread Curve and Industrial Production in the United States

Jorge Chan-Lau and Iryna Ivaschenko

No 2002/008, IMF Working Papers from International Monetary Fund

Abstract: The term structure of domestic investment grade bond spreads - or corporate spread curve - contains useful information to predict future changes in industrial production, beyond the information already contained in interest rates, commercial paper-treasury bill spreads, and lagged values of industrial production. In fact, the corporate spread curve can explain the cumulative growth rate of industrial production over 3- to 48-month horizons, and the marginal growth rate over 6- to 18-month horizons. Unlike other financial variables, the corporate spread curve has been a stable predictor of real activity for the last fifteen years.

Keywords: WP; structural break; financial asset; term structure; flight to quality; Treasury yield curve; Investment grade bonds; corporate spreads; real activity; forecasting; GMM estimation; United States; Treasury securities; Aaa-rated bond; numbers in parenthesis; Treasury yield curve coefficients estimate; number of lag; agency bond; Industrial production; Yield curve; Securities; Corporate bonds; Bonds (search for similar items in EconPapers)
Pages: 44
Date: 2002-01-01
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Citations: View citations in EconPapers (4)

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