TY  - JOUR
AU  - Mishkin,Frederic S.
TI  - Yield Curve
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3550
PY  - 1990
Y2  - December 1990
UR  - http://www.nber.org/papers/w3550
L1  - http://www.nber.org/papers/w3550.pdf
N1  - Author contact info:
Frederic S. Mishkin
Columbia University
Graduate School of Business
Uris Hall 817
3022 Broadway
New York, NY 10027
Tel: 212-854-3488
Fax: 212/662-8474
E-Mail: fsm3@columbia.edu
AB  - This paper provides a brief survey of the relationship between the yield curve and future changes in interest rates and inflation. The expectations hypothesis of the term structure indicates .that when the yield curve is upward sloping, future short-term and long-term interest rates are expected to rise. Empirical evidence finds that as predicted by the expectations hypothesis, yield spreads are positively correlated with future changes in short-term interest rates, particularly at long horizons. However, yield spreads are negatively correlated with next period's change in long-term interest rates, the opposite prediction of the expectations hypothesis. Empirical evidence also suggests that the yield curve has almost no ability to forecast future inflation changes for short horizons: however, at horizons of a year or greater, the yield curve contains a great deal of information about the future path of inflation.
ER  -