Main Article Content
The steepness of the bond yield curve is an excellent indicator of a possible future economic activity. A rise in the short rate tends to flatten the yield curve and slows down real growth in the near-term. This paper analyses the dependence between slope of the yield curve and an economic activity of selected countries between 2000 and 2016. The slope of the yield curve can be measured as the yield spread between sovereign 10-year and 3-month bonds. The results showed that the best predictive lags are the lag of four and five quarters. The results also confirm that 10-year and 3-month yield spread has a significant predictive power for real GDP growth after a financial crisis. These findings can benefit investors and provide evidence of the potential usefulness of the yield curve spreads as indicators of the future economic activity.
Keywords: GDP prediction, yield curve, slope, spread.
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).