CIRJE-F-784 "How Does Yield Curve Predict GDP Growth? A Macro-Finance Approach Revisited"
Author Name Koeda, Junko
Date January 2011
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Remarks  Subsequently published in Applied Economics Letters. 
Abstract

This note analyzes the yield-curve predictability for GDP growth by modifying the time-series property of the interest rate process in Ang, Piazzesi, and Wei (2006). When interest rates have a unit root and term spreads are stationary, the short rate's forecasting role changes, and the combined information from the short rate and term spread intuitively reveals the relationship between the shift of yield curves and GDP growth.