The Predictive Power of the Yield Curve Across Countries and Time

45 Pages Posted: 27 Sep 2010 Last revised: 23 Apr 2023

See all articles by Menzie David Chinn

Menzie David Chinn

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics; National Bureau of Economic Research (NBER)

Kavan Kucko

Board of Governors of the Federal Reserve System

Date Written: September 2010

Abstract

In recent years, there has been renewed interest in the yield curve (or alternatively, the term premium) as a predictor of future economic activity. In this paper, we re-examine the evidence for this predictor, both for the United States, as well as European countries. We examine the sensitivity of the results to the selection of countries, and time periods. We find that the predictive power of the yield curve has deteriorated in recent years. However there is reason to believe that European country models perform better than non-European countries when using more recent data. In addition, the yield curve proves to have predictive power even after accounting for other leading indicators of economic activity.

Suggested Citation

Chinn, Menzie David and Kucko, Kavan, The Predictive Power of the Yield Curve Across Countries and Time (September 2010). NBER Working Paper No. w16398, Available at SSRN: https://ssrn.com/abstract=1683168

Menzie David Chinn (Contact Author)

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706-1393
United States
608-262-7397 (Phone)
608-262-2033 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kavan Kucko

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
182
Abstract Views
1,179
Rank
298,914
PlumX Metrics