TY  - JOUR
AU  - Ang,Andrew
AU  - Piazzesi,Monika
AU  - Wei,Min
TI  - What Does the Yield Curve Tell us about GDP Growth?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10672
PY  - 2004
Y2  - August 2004
UR  - http://www.nber.org/papers/w10672
L1  - http://www.nber.org/papers/w10672.pdf
N1  - Author contact info:
Andrew Ang
Columbia Business School
3022 Broadway 413 Uris
New York, NY 10027
Tel: 212/854-9154
Fax: 212/662-8474
E-Mail: aa610@columbia.edu

Monika Piazzesi
Department of Economics
Stanford University
579 Serra Mall
Stanford, CA 94305-6072
Tel: (650) 723-9289
E-Mail: piazzesi@stanford.edu

Min Wei
Federal Reserve Board
Division of Monetary Affairs
Mail stop 74
Washington, DC 20551
E-Mail: min.wei@frb.gov
AB  - A lot, including a few things you may not expect. Previous studies find that the term spread forecasts GDP but these regressions are unconstrained and do not model regressor endogeneity. We build a dynamic model for GDP growth and yields that completely characterizes expectations of GDP. The model does not permit arbitrage. Contrary to previous findings, we predict that the short rate has more predictive power than any term spread. We confirm this finding by forecasting GDP out-of-sample. The model also recommends the use of lagged GDP and the longest maturity yield to measure slope. Greater efficiency enables the yield-curve model to produce superior out-of-sample GDP forecasts than unconstrained OLS regressions at all horizons.
ER  -