Predicting real growth and the probability of recession in the Euro area using the yield spread

Duarte, Agustin; Venetis, Ioannis A.; Paya, Iván

doi:10.1016/j.ijforecast.2004.09.008

Cited by 62 publications

(38 citation statements)

References 40 publications

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“…Rockinger [7]; Boldrin et al [8]; Estrella et al [9]; Vassalou [10]; Duarte et al [11]; Hong et al [12]; Clements and Galvao [13]; Cooper and Priestley [14]; Marcellino and Schumacher [15], amongst others). Theoretically, changes in industrial production lead to changes in activity, employment and liquidity in the economy.…”

Section: Open Accessmentioning

confidence: 99%

New Evidence on the Information and Predictive Content of the Baltic Dry Index

Apergis

Payne

2013

IJFS

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This empirical study analyzes the information and predictive content of the Baltic Dry Index (BDI) with respect to a range of financial assets and the macroeconomy. By using panel methodological approaches and daily data spanning the period 1985-2012, the empirical analysis documents the joint predictability capacity of the BDI for both financial assets and industrial production. The results reveal the role of the BDI in predicting the future course of the real economy, yielding a link between financial asset markets and the macroeconomy.

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Section: Open Accessmentioning

confidence: 99%

New Evidence on the Information and Predictive Content of the Baltic Dry Index

Apergis

Payne

2013

IJFS

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“…Preliminary analysis leads to the choice of lagged GDP growth as a threshold variable as found in Duarte et al (2005). The inclusion of the threshold is meant to improve the fit of the model and to monitor whether time varying behavior can in fact be traced back to threshold effects.…”

Section: State Dependent Threshold Models: Resultsmentioning

confidence: 99%

The Yield Spread and GDP Growth - Time Varying Leading Properties and the Role of Monetary Policy

Hogrefe

2007

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu JEL classification: C32, E37, E43, E52 Terms of use: Documents in

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“…This relation was confirmed by Shaaf (2000), Ang, Piazzesi, and Wei (2006), Aretz and Peel (2008) and Bordo and Haubrich (2008), although Bordo and Haubrich reported that spreads only improved forecast in three of the nine sub-periods studied. Looking at this relation in a more international context, Esrella, Rogrigues and Schich (2003), Duarte, Venetis and Paya (2005) and Nakaoto (2005) found similar results in Germany, the Euro area and Japan, respectively. …”

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confidence: 79%

Modelling and forecasting international interest rate spreads: UK, Germany, Japan and the USA

Gough

Nowman

Dellen

2014

IJFERM

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The interest rate spread is of importance to policy makers and finance professionals in asset allocation and is a common measure of financial market stress. In this paper we model and forecast the interest rate spreads for a number of countries using two well known continuous time models and discrete time ARMA and ARFIMA models. We use monthly and Biographical notes:Professor Gough is Head of Department of Accounting, Finance and Governance.Ben Nowman is Professor of Finance. Dr Stefan Van Dellen is Senior Lecturer in Finance.Acknowledgments: We thank the referees for substantial comments which helped us improve the paper. IntroductionThe modelling and forecasting of interest rate spreads, or what is commonly refereed to as the term spread or yield curve slope, is of importance for central bankers and other market practitioners. Interest rate spreads are simply the difference between long term and short term rates. Interestingly a change from a positive to a negative interest rate spread would indicate that a recession is likely in the future (see below for a more detailed discussion on this).Furthermore, the interest rate spread can be used to forecast future short-term interest rates, where Campbell and Schiller (1987), Fama (1984Fama ( , 1990 and Hardouvelis (1988), amongst many others, document that interest rate spreads can predict the correct direction of future changes in short rates. Finally, interest rate spreads are of particular use to traders in international financial markets who trade the slope of the yield curve and fund managers who use this for asset allocation purposes.The past twenty years has seen the emergence of the use of the term spread ability to predict output growth and recessions as an important area of research, where Wheelock and Wohar (2009) provide an excellent recent survey of these literature. Studies on predicting output growth for example include, Laurent (1988), Harvey (1988Harvey ( , 1989, Estrelle and Hardouvelis (1991) provided some of the first empirical evidence on how interest rate spreads could be used to predict output growth in the US. This relation was confirmed by Shaaf (2000), Ang, Piazzesi, and Wei (2006), Aretz and Peel (2008) and Bordo and Haubrich (2008), although Bordo and Haubrich reported that spreads only improved forecast in three of the nine sub-periods studied. Looking at this relation in a more international context, Esrella, Rogrigues and Schich (2003), Duarte, Venetis and Paya (2005) and Nakaoto (2005) found similar results in Germany, the Euro area and Japan, respectively. 3Looking at a different application of interest rate spreads, Estrelle and Hardouvelis (1991) and Estrella and Mishkin (1998) demonstrated that the interest rate spread significantly outperforms other financial and macroeconomic variables in forecasting recessions in the US.This relation was again confirmed by Galvao (2006) and Rosenberg and Maurer (2008), while Bernard and Gerlach (1998) found a similar relation in eight industrialised countries. In Ivanova, Lahiri...

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Predicting real growth and the probability of recession in the Euro area using the yield spread

Abstract: IVIE working papers offer in advance the results of economic research under way in order to encourage a discussion process before sending them to scientific journals for their final publication.

Cited by 62 publications

References 40 publications

New Evidence on the Information and Predictive Content of the Baltic Dry Index

New Evidence on the Information and Predictive Content of the Baltic Dry Index

The Yield Spread and GDP Growth - Time Varying Leading Properties and the Role of Monetary Policy

Modelling and forecasting international interest rate spreads: UK, Germany, Japan and the USA

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