A Divisia User Cost Interpretation of the Yield Spread Recession Prediction
| Autor: | Ryan S. Mattson |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2019 |
| Předmět: |
050208 finance
Financial stability media_common.quotation_subject 05 social sciences yield spread lcsh:Risk in industry. Risk management Divisia index Recession Interest rate Great recession lcsh:HD61 Yield spread Bond valuation recessions 0502 economics and business lcsh:Finance lcsh:HG1-9999 ddc:330 Econometrics Economics 050207 economics Divisia media_common |
| Zdroj: | Journal of Risk and Financial Management, Vol 12, Iss 1, p 7 (2019) Journal of Risk and Financial Management Volume 12 Issue 1 |
| ISSN: | 1911-8074 |
| Popis: | A re-evaluation of the role of interest rates is necessary in the wake of the Great Recession. This paper will re-evaluate the interpretation and empirical use of the yield spread as a predictor of recessions, focusing on the simplified methodology in a New York Federal Reserve Bank paper by Estrella and Trubin. Using the user cost difference formula to calculate bond prices following the methodology in the Divisia literature begun by William A. Barnett and a unique data set from the Center for Financial Stability, the yield spread is shown to be a form of the user cost difference, and use of the user cost is shown to marginally improve the predictive abilities of the yield spread. Further research into this view of the link of interest rates and economic activity is proposed. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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