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Predicting Growth Components ¨C Unemployment, Housing Prices and Consumption Using Both Government and Corporate Yield Curves

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  • Dan Saar
  • Yossi Yagil

Abstract

In this study, we predict changes in specific segments of economic growth including the unemployment rate, the housing prices and changes in personal consumption by employing corporate and government bonds. Our hypothesis is that the use of yield curves of corporate bonds will improve the predictions over previous models that used only the yield curves of government bonds. Our results support that contention. We find that corporate bonds¡¯ spreads actually help predicting the changes in both the unemployment rate and housing prices. We also find a significant positive relationship between bond spreads and future changes in personal consumption levels, but the results are weaker than in the other two segments. One additional finding worth noting is that government bonds are better predictors for the long-term, whereas corporate bonds are better indicators for the short-term.

Suggested Citation

  • Dan Saar & Yossi Yagil, 2018. "Predicting Growth Components ¨C Unemployment, Housing Prices and Consumption Using Both Government and Corporate Yield Curves," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(6), pages 180-192, June.
    • Handle: RePEc:ibn:ijefaa:v:10:y:2018:i:6:p:180-192
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    References listed on IDEAS

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    More about this item

    Keywords

    bond yields; housing prices; unemployment rates; consumption; forecasting; corporate bonds;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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