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The mortgage spread as a predictor of real-time economic activity

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  • Hännikäinen, Jari

Abstract

We analyze the predictive content of the mortgage spread for U.S. economic activity. We find that the spread contains predictive power for real GDP and industrial production. Furthermore, it outperforms the term spread and Gilchrist– Zakrajsek spread in a real-time forecasting exercise. However, the predictive ability of the mortgage spread varies over time.

Suggested Citation

  • Hännikäinen, Jari, 2014. "The mortgage spread as a predictor of real-time economic activity," MPRA Paper 58360, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:58360
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    References listed on IDEAS

    as
    1. Hännikäinen, Jari, 2015. "Zero lower bound, unconventional monetary policy and indicator properties of interest rate spreads," Review of Financial Economics, Elsevier, vol. 26(C), pages 47-54.
    2. Raffaella Giacomini & Halbert White, 2006. "Tests of Conditional Predictive Ability," Econometrica, Econometric Society, vol. 74(6), pages 1545-1578, November.
    3. Walentin, Karl, 2014. "Business cycle implications of mortgage spreads," Journal of Monetary Economics, Elsevier, vol. 67(C), pages 62-77.
    4. Serena Ng & Jonathan H. Wright, 2013. "Facts and Challenges from the Great Recession for Forecasting and Macroeconomic Modeling," Journal of Economic Literature, American Economic Association, vol. 51(4), pages 1120-1154, December.
    5. Jon Faust & Simon Gilchrist & Jonathan H. Wright & Egon Zakrajšsek, 2013. "Credit Spreads as Predictors of Real-Time Economic Activity: A Bayesian Model-Averaging Approach," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1501-1519, December.
    6. James H. Stock & Mark W.Watson, 2003. "Forecasting Output and Inflation: The Role of Asset Prices," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 788-829, September.
    7. Raffaella Giacomini & Barbara Rossi, 2010. "Forecast comparisons in unstable environments," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(4), pages 595-620.
    8. Simon Gilchrist & Egon Zakrajsek, 2012. "Credit Spreads and Business Cycle Fluctuations," American Economic Review, American Economic Association, vol. 102(4), pages 1692-1720, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    mortgage spread; forecasting; real-time data;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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