Money, interest rate spreads, and economic activity

Abstract

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Monetary Policy and Forecasts for Real GDP Growth: An Empirical Investigation for the Federal Republic of Germany

“…Davis and Henry (1994) show that when the yield curve (as well as other spread variables) is used in vector autoregressions, it provides significant information about future macroeconomic activity even after allowing for the effects of other macroeconomic variables. Sauer and Scheide (1995) present evidence that the interest rate spread is Granger-causal to real GDP growth even taking into account the impact of the quantity of money. Gerlach (1997) shows that the interest rate spread contains considerable information about future changes in inflation.…”

“…11. Sauer and Scheide (1995) also use monetary aggregates besides the interest rate spread, but by using all (up to three) lags of the explanatory variables they are unable to conclude whether these variables can be used as predictors over a horizon of four quarters or more. However, as is shown below, the optimal time horizon of forecasts is four quarters for most monetary aggregates.…”

Financial variables as leading indicators in Greece

“…Ho~: eve L the impact of term structt~_re innovations on economic activity is less documented (or even negligible) for European countries [Canova and De Nicol6, 1997;Sauer and Scheide, 1995]. Similarly, the literature finds that interest rates and money supply are considered leading business cycle indicators for the U.S., whereas the evidence for European countries is less decisive [Fiorito and Kollintzas, 1994;Andreou, Osborn, and Sensier 2000].…”

An error correction factor model of term structure slopes in international swap markets

“…In further research [Hardouvelis (1988), Moersch (1996) and Sauer and Scheide (1995), among others], shortterm interest rates and money supply growth have sometimes been included to show that the information content in term structure slopes is not just due to monetary policy interventions. Similar lines of research have paid attention to the role of the term structure slope as a leading indicator of future inflation and future stock market activity.…”