Sometimes it Helps: The Evolving Predictive Power of Spreads on GDP Dynamics

36 Pages Posted: 27 Jul 2012

See all articles by Giulio Nicoletti

Giulio Nicoletti

European Central Bank

Raffaele Passaro

European Central Bank (ECB)

Date Written: June 25, 2012

Abstract

We investigate the predictive content of credit and government interest spreads with respect to the Italian GDP growth. Our analysis with Dynamic Model Averaging identifies when interest spreads were more useful predictors of economic activity: these periods are not limited to the Great Recession. For credit spreads we gather information from both bank loans and corporate bonds and we compare their predictive role over time and over different forecasting horizons.

Keywords: GDP forecasting, Bayesian econometrics, model averaging

JEL Classification: C52, E37

Suggested Citation

Nicoletti, Giulio and Passaro, Raffaele, Sometimes it Helps: The Evolving Predictive Power of Spreads on GDP Dynamics (June 25, 2012). ECB Working Paper No. 1447, Available at SSRN: https://ssrn.com/abstract=2091135

Giulio Nicoletti (Contact Author)

European Central Bank ( email )

Kaiserstrasse 29
Frankfurt am Main, Hessen 60311
Germany

Raffaele Passaro

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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