Has the Predictability of the Yield Spread Changed?
- Authors
- Kim, Dong Heon; Park, Euihwan
- Issue Date
- 2018
- Publisher
- SEOUL NATL UNIV, INST ECONOMIC RESEARCH
- Keywords
- Yield spread; Break; Predictability; Expectations effect; Term premium effect; Great Moderation
- Citation
- SEOUL JOURNAL OF ECONOMICS, v.31, no.4, pp.449 - 463
- Indexed
- SCOPUS
KCI
- Journal Title
- SEOUL JOURNAL OF ECONOMICS
- Volume
- 31
- Number
- 4
- Start Page
- 449
- End Page
- 463
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/80840
- ISSN
- 1225-0279
- Abstract
- This paper examines the stability of the predictive power of the yield spread for future GDP growth. We find that the ability of the spread to predict future GDP growth has weakened since 1984:Q1. Given the decomposition of the yield spread into the expectation component and the term premium component, we investigate the change in the predictability of both components and find that the term premium component appears to have lost the predictive power significantly while the predictive power of the expectation component has remained. We conjecture that since the 1984:Q1, the cyclical movement of the term premium seems to have been reduced due to the significant reduction in the volatility of US macroeconomy.
- Files in This Item
- There are no files associated with this item.
- Appears in
Collections - College of Political Science & Economics > Department of Economics > 1. Journal Articles
Items in ScholarWorks are protected by copyright, with all rights reserved, unless otherwise indicated.