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Does the term structure predict Australia's future output growth? Discussion Paper No. 139,

Valadkhani, Abbas (2003) Does the term structure predict Australia's future output growth? Discussion Paper No. 139,. [Working Paper]

Abstract

This paper examines whether the term structure of interest rates provides predictive power for real output growth using quarterly time series data from 1980:1 to 2002:2. The empirical results are consistent with previous studies undertaken for France, Germany and the UK as well as earlier Australian works. It is found that a 10 per cent increase in the interest rate spread between the 10-year Treasury bond and the 90-day bank bill results in approximately 4 per cent rise in GDP growth over the succeeding seven-nine quarters. This result is robust to the inclusion of two other relevant predictors in the accumulated future growth equation, namely the growth rate of M1, and the growth rate of the S&P/ASX 200 share price index. It is also argued that after the US, the interest rate spread possesses relatively more predictive power for Australian GDP growth than those for France, Germany and the UK.

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ID Code: 508
Item Type: Working Paper
Keywords: growth output, Australia, prediction
ISSN: 1324-5910
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > International Economics and International Finance (140210)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2003 (Please consult author)
Deposited On: 03 Nov 2004
Last Modified: 05 Jan 2011 23:24

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