The Corporate Spread Curve and Industrial Production in the United States

Author/Editor: Chan-Lau, Jorge A. ; Ivaschenko, Iryna V.
Publication Date: January 01, 2002
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: The term structure of domestic investment grade bond spreads - or corporate spread curve - contains useful information to predict future changes in industrial production, beyond the information already contained in interest rates, commercial paper-treasury bill spreads, and lagged values of industrial production. In fact, the corporate spread curve can explain the cumulative growth rate of industrial production over 3- to 48-month horizons, and the marginal growth rate over 6- to 18-month horizons. Unlike other financial variables, the corporate spread curve has been a stable predictor of real activity for the last fifteen years.
Series: Working Paper No. 02/8
Subject(s): Economic forecasting | United States | Industrial production | Economic models

Author's Keyword(s): Investment grade bonds | corporate spreads | term structure | real activity | forecasting | GMM estimation | United States
Publication Date: January 01, 2002
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA0082002 Pages: 44
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