Chen, George

Valadkhani, Abbas

Grant, Bligh

2016

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.

Journal of Economic Studies, 43(2), p. 222-241

1758-7387

0144-3585

https://hdl.handle.net/1959.11/19981

en

Emerald Publishing Limited

How useful is the yield spread as a predictor of growth in Australia?

Journal Article

Publication