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How useful is the yield spread as a predictor of growth in Australia?
- Source :
- Journal of Economic Studies; 2016, Vol. 43 Issue 2, p222-241, 20p
- Publication Year :
- 2016
-
Abstract
- Purpose – The purpose of this paper is to examine the usefulness of the yield spread for forecasting growth in the Australian economy since 1969. Design/methodology/approach – This paper applies time series analysis to evaluate the in-sample and out-of-sample forecasting power of the spread-growth nexus in Australia for the period spanning from 1969 to 2014. Findings – This paper concludes that the spread serves as a useful predictor of growth in output, private dwellings, private fixed capital formation, and inventories in Australia, both in-sample and out-of-sample. Its predictive content is not sensitive to the inclusion of monetary policy variables or the switch to the inflation-targeting regime by the Reserve Bank of Australia in the early 1990s. Originality/value – This paper provides significant evidence to policy makers and market participants on the usefulness of the spread in forecasting output growth for up to eight quarters ahead. [ABSTRACT FROM AUTHOR]
- Subjects :
- ECONOMIC development
STOCKS (Finance)
INVESTORS
SOCIOECONOMICS
ECONOMIC forecasting
Subjects
Details
- Language :
- English
- ISSN :
- 01443585
- Volume :
- 43
- Issue :
- 2
- Database :
- Complementary Index
- Journal :
- Journal of Economic Studies
- Publication Type :
- Academic Journal
- Accession number :
- 114697729
- Full Text :
- https://doi.org/10.1108/JES-09-2014-0159