Yield Curve

Frederic Mishkin

No 3550, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provides a brief survey of the relationship between the yield curve and future changes in interest rates and inflation. The expectations hypothesis of the term structure indicates .that when the yield curve is upward sloping, future short-term and long-term interest rates are expected to rise. Empirical evidence finds that as predicted by the expectations hypothesis, yield spreads are positively correlated with future changes in short-term interest rates, particularly at long horizons. However, yield spreads are negatively correlated with next period's change in long-term interest rates, the opposite prediction of the expectations hypothesis. Empirical evidence also suggests that the yield curve has almost no ability to forecast future inflation changes for short horizons: however, at horizons of a year or greater, the yield curve contains a great deal of information about the future path of inflation.

Date: 1990-12
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Eatwell, John, Murray Milgate and Peter Newman (eds.) The New Palgrave Dictionary of Money and Finance. London: Macmillan Press, 1992.

Downloads: (external link)
http://www.nber.org/papers/w3550.pdf (application/pdf)

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:nbr:nberwo:3550

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3550

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().