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The Corporate Spread Curve and Industrial Production in the United States

Author/Editor: Chan-Lau, Jorge A. | Ivaschenko, Iryna V.
Authorized for Distribution: January 1, 2002
Electronic Access: Free Full Text (PDF file size is 1,177KB)
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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
    Published:   January 1, 2002        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA0082002   Pages:   44
    Price:   US$15.00
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