TY  - JOUR
AU  - Gertler,Mark
AU  - Lown,Cara S.
TI  - The Information in the High Yield Bond Spread for the Business Cycle: Evidence and Some Implications
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7549
PY  - 2000
Y2  - February 2000
UR  - http://www.nber.org/papers/w7549
L1  - http://www.nber.org/papers/w7549.pdf
N1  - Author contact info:
Mark Gertler
Department of Economics
New York University
269 Mercer Street, 7th Floor
New York, NY 10003
Tel: 212/998-8931
Fax: 212/995-4186
E-Mail: mark.gertler@nyu.edu
AB  - The market for high yield (below investment-grade) corporate bonds developed in the middle 1980s. We show that, since this time, the high yield spread has had significant explanatory power for the business cycle. We interpret this finding as possibly symptomatic of financial factors at work in the business cycle, along the lines suggested by the financial accelerator.  We also show that over this period the high yield spread outperforms other leading financial indicators, including the term spread, the paper-bill spread and the Federal Funds rate. We conjecture that changes in the conduct of monetary policy over time may account for the reduced informativeness of these alternative indicators, all of which are tied closely to monetary policy.
ER  -