How Stable is the Forecasting Performance of the Yield Curve for Output Growth?

13 Pages Posted: 24 Nov 2006

See all articles by Raffaella Giacomini

Raffaella Giacomini

University College London - Department of Economics; University of California, Los Angeles - Department of Economics

Barbara Rossi

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Barcelona Graduate School of Economics

Abstract

We provide an extensive evaluation of the predictive performance of the US yield curve for US gross domestic product growth by using new tests for forecast breakdown, in addition to a variety of in-sample and out-of-sample evaluation procedures. Empirical research over the past decades has uncovered a strong predictive relationship between the yield curve and output growth, whose stability has recently been questioned. We document the existence of a forecast breakdown during the BurnsMiller and Volker monetary policy regimes, whereas during the early part of the Greenspan era the yield curve emerged as a more reliable model to predict future economic activity.

Suggested Citation

Giacomini, Raffaella and Rossi, Barbara, How Stable is the Forecasting Performance of the Yield Curve for Output Growth?. Oxford Bulletin of Economics and Statistics, Vol. 68, No. S1, pp. 783-795, December 2006, Available at SSRN: https://ssrn.com/abstract=947011 or http://dx.doi.org/10.1111/j.1468-0084.2006.00456.x

Raffaella Giacomini (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

University of California, Los Angeles - Department of Economics ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095-1361
United States

Barbara Rossi

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

Barcelona Graduate School of Economics ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
11
Abstract Views
634
PlumX Metrics