The predictive ability of a risk-adjusted yield spread for economic activity in Europe

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• 作者：Alfred Guender ; Bernard Tolan
• 关键词：Corporate bond yield spread ; Predictive content ; Economic activity in Europe ; Financial and Debt Crisis
• 刊名：Empirica
• 出版年：2017
• 出版时间：February 2017
• 年：2017
• 卷：44
• 期：1
• 页码：1-27
• 全文大小：
• 刊物类别：Business and Economics
• 刊物主题：European Integration; International Economics; Macroeconomics/Monetary Economics//Financial Economics; Econometrics; Industrial Organization; Public Finance;
• 出版者：Springer US
• ISSN：1573-6911
• 卷排序：44

文摘

This paper examines whether the pricing of risk is important for macroeconomic activity at the country level. We design a risk-adjusted yield spread and test its predictive content for economic activity on the periphery and the centre of Europe over the 1990–2012 period. This risk-adjusted bond yield spread is defined in a cross-country context and referred to as the GZ-type spread. Increases in the yield on corporate bonds issued in the countries on the periphery relative to the riskless yield (calculated using German zero-coupon term structure data) reflect increases in the risk premium that the financial market imposes on borrowers. The risk premium rises in all countries during European-wide recessions of the recent past, particularly those associated with the Global Financial and the Sovereign Debt Crisis. Our findings indicate further that this GZ-type spread acts as a reliable signal for imminent and near-term economic activity in countries where financial markets were shaken to their foundations during the Crisis period. For Germany, the GZ-spread has predictive content for industrial production but not for the unemployment rate. For GDP its predictive ability is confined to the EMU period.