Does the long-term interest rate predict future inflation? A multi-country analysis

Article Abstract:

A study examines the spread between the multiperiod interest rate and the one-period inflation rate in terms of its ability to forecast inflation. The Fisher hypothesis claims that an increased spread is a sign that one-period inflation will increase. Data for the 1962-1993 period in 13 Organization for Economic Cooperation and Development nations is analyzed to determine the effectiveness of the hypothesis. Integration and cointegration methods are used in the time-series analysis of both interest and inflation rates. Results show that the spread is a useful tool for measuring the effect of inflation on the economy.

Economic research, Interest rates

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Predicting U.S. recessions: financial variables as leading indicators

Article Abstract:

Prediction of future US economic recessions can be greatly enhanced through consideration of different financial variables, such as stock prices and interest rates. Forecasting results revealed the usefulness of stock prices in dealing with one to three-quarter horizons. Yield curve spread, meanwhile, is the preferred choice when it comes to dealing with horizons beyond one quarter. It also helps in yielding better prediction results when solely used.

Economics, Research and Development in the Social Sciences and Humanities, United States economic conditions, Economic indicators

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In search of a "strictly rational" forecast

Article Abstract:

Criteria for classifying time series forecasts of inflation based on the degree of rationality are postulated. Research using ASA-NBER forecasts reveals that forecasts are unlikely to meet strict rationality criteria.

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