Causes of the Increase in the Predictability of the Nominal Term Spread for Future Economic Activity

The yield curve is an important tool to assess the economic progress of a country. In this study, we examine the strength of the relationship between term spread and economic activity, and between the components of the yield curve and economic activity in the G7 countries using monthly data on yield rates and seasonally adjusted data on the industrial production index (IPI). After matching the start and end date of the IPI with the yield rates, the data used and respective time period are as follows: Canada: March-1994 to December-2018, France: January-1999 to December-2018, Germany: October-2005 to December-2018, Italy: July-2009 to December-2018, Japan: July-1994 to January-2019, the UK: January-1994 to December-2018, and the US: February-1990 to January-2019. The results show positive associations between term spread and economic activity for Canada, France, Germany, Japan, the UK, and the US. For Italy, a negative association is noted. All three empirical factors could predict economic activity for France and Germany at the 12-month horizon only. For all other horizons, the factors’ ability to predict economic activity varies. We observe that by including additional macro-finance variables such as the current economic growth rate and the 3-month yield rate to capture the term structure level effects, the relationship between term spread and economic activity becomes stronger. This implies that the usefulness of yield curve and its decomposed components for the purpose of predicting economic activity should be cautiously modelled and employed for policy.

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On the Predictive Power of the Malaysian T Bills Term Spread in Predicting Real Economic Activity

Malaysian Management Journal ◽

10.32890/mmj.3.2.1999.8566 ◽

2020 ◽

Author(s):

Noor Azlan Ghazali ◽

Soo Wah Low

Keyword(s):

Interest Rates ◽

Economic Activity ◽

Equation System ◽

Output Growth ◽

Economic Cycle ◽

Term Spread ◽

Long Run ◽

The Difference ◽

Near Term

The ability of financial market interest rates to predict real economic activity has gained considerable attention of economics and financial researchers. In this regard, the term spread, i.e. the difference between long term and short term yield is argued to be an effective indicator to predict economic cycle. We investigate this proposition for the Malaysian economy using the T bills discount rates. Our results of both, single and multi-equation system of vector autoregression (VAR), support the case for Malaysia. Current T bills spread is shown to be a significant indicator for annual output growth for up to six months ahead. We also show that information conveyed by the term spread is unique and not of those implied by the monetary policy. Our results also indicate that, the power of term spread is limited for the near term prediction and over the long run money dominates spread in predicting output.

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Economic Activity

10.1017/cbo9780511560033 ◽

1967 ◽

Cited By ~ 23

Author(s):

G. C. Harcourt ◽

P. H. Karmel ◽

R. H. Wallace

Keyword(s):

Economic Activity

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ADMINISTRATIVE AND LEGAL REGULATION OF SOME SPECIES OF FOREIGN ECONOMIC ACTIVITY TO BE LICENSED

Law Journal of Donbass ◽

10.32366/2523-4269-2018-64-3-114-119 ◽

2018 ◽

Vol 64 (3) ◽

pp. 114-119

Author(s):

Anastasiia Filipenko ◽

Keyword(s):

Economic Activity ◽

Legal Regulation

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Institutional Specifics of Business Self-regulation

Voprosy Ekonomiki ◽

10.32609/0042-8736-2003-11-88-98 ◽

2003 ◽

pp. 88-98 ◽

Cited By ~ 2

Author(s):

A. Obydenov

Keyword(s):

Economic Activity ◽

Self Regulation ◽

Institutional Arrangement ◽

Voluntary Membership ◽

Sufficient Set ◽

The Subject ◽

Necessary And Sufficient ◽

Object Of Control ◽

Self Enforcement

Self-regulation appears to be a special institution where economic actors establish their own rules of economic activity for themselves in a specific business field. At the same time they are the object of control within these rules and the subject of legal management of the controller. Self-regulation contains necessary prerequisites for fundamental resolution of the problem of "controlling the controller". The necessary and sufficient set of five self-regulation organization functions provides efficiency of self-regulation as the institutional arrangement. The voluntary membership in a self-regulation organization is essential for ensuring self-enforcement of institutional arrangement of self-regulation.

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Economic effects of monetary policy in Russia: What do large datasets tell us?

Voprosy Ekonomiki ◽

10.32609/0042-8736-2020-4-31-53 ◽

2020 ◽

pp. 31-53 ◽

Cited By ~ 1

Author(s):

Anna A. Pestova ◽

Natalia A. Rostova

Keyword(s):

Monetary Policy ◽

Interest Rate ◽

Interest Rates ◽

Economic Activity ◽

Global Financial Crisis ◽

Exchange Rate Regime ◽

Aggregate Demand ◽

Economic Effects ◽

Theoretical Concepts ◽

Empirical Estimates

Is the Bank of Russia able to control inflation and, at the same time, manage aggregate demand using its interest rate instruments? In other words, are empirical estimates of the effects of monetary policy in Russia consistent with the theoretical concepts and experience of advanced economies? This paper is aimed at addressing these issues. Unlike previous research, we employ “big data” — a large dataset of macroeconomic and financial data — to estimate the effects of monetary policy in Russia. We focus exclusively on the period after the 2008—2009 global financial crisis when the Bank of Russia announced the abandoning of its fixed ruble exchange rate regime and started to gradually transit to an interest rate management. Our estimation results do not confirm standard responses of key economic activity and price variables to tightening of monetary policy. Specifically, our estimates do not reveal a statistically significant restraining effect of the Bank of Russia’s policy of high interest rates on inflation in recent years. At the same time, we find a significant deteriorating effect of the monetary tightening on economic activity indicators: according to our conservative estimates, each of the key rate increases occurred in March and December 2014 had led to a decrease in the industrial production index by about 0.2 percentage points within a year.

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