{"title":"Yield curve and the macroeconomy: Evidence from a DSGE model with housing","authors":"Xiaojin Sun , Kwok Ping Tsang","doi":"10.1016/j.jmacro.2022.103484","DOIUrl":null,"url":null,"abstract":"<div><p>The slope of the yield curve has long been found to be a useful predictor of future economic activities, but the relationship is unstable. One change we have identified in this paper is that, between the early 1990s and the collapse of the housing market in 2007, movements at the long end of the yield curve have an increase in predictive power. We use a medium-scale DSGE model<span> with a housing sector and a yield curve as a guide to find out the sources of such change. The model implies that an increase in the short-term interest rate and a decrease in the long-term interest rate have different impacts on the economy, and to use the slope as a predictor one needs to distinguish movements at the two ends of the yield curve. Based on simulated data from the model, we find that nominal wage rigidities and the capital adjustment costs are closely related to the predictive power of the yield curve. This result is further confirmed with actual data.</span></p></div>","PeriodicalId":47863,"journal":{"name":"Journal of Macroeconomics","volume":"75 ","pages":"Article 103484"},"PeriodicalIF":1.3000,"publicationDate":"2023-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Macroeconomics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0164070422000775","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
The slope of the yield curve has long been found to be a useful predictor of future economic activities, but the relationship is unstable. One change we have identified in this paper is that, between the early 1990s and the collapse of the housing market in 2007, movements at the long end of the yield curve have an increase in predictive power. We use a medium-scale DSGE model with a housing sector and a yield curve as a guide to find out the sources of such change. The model implies that an increase in the short-term interest rate and a decrease in the long-term interest rate have different impacts on the economy, and to use the slope as a predictor one needs to distinguish movements at the two ends of the yield curve. Based on simulated data from the model, we find that nominal wage rigidities and the capital adjustment costs are closely related to the predictive power of the yield curve. This result is further confirmed with actual data.
期刊介绍：
Since its inception in 1979, the Journal of Macroeconomics has published theoretical and empirical articles that span the entire range of macroeconomics and monetary economics. More specifically, the editors encourage the submission of high quality papers that are concerned with the theoretical or empirical aspects of the following broadly defined topics: economic growth, economic fluctuations, the effects of monetary and fiscal policy, the political aspects of macroeconomics, exchange rate determination and other elements of open economy macroeconomics, the macroeconomics of income inequality, and macroeconomic forecasting.
求助内容：
应助结果提醒方式：
京公网安备 11010802042870号
