Author : Antonio Roma
Release : 1997
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Kind : eBook
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Book Synopsis The Cyclical Behavior of Interest Rates by : Antonio Roma

Download or read book The Cyclical Behavior of Interest Rates written by Antonio Roma. This book was released on 1997. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the behavior of the term structure of interest rates over the business cycle. In contrast to prior studies that measure the business cycle by the simple growth in aggregate economic activity, we consider an alternative measure: the deviation of aggregate economic activity from its potentially stochastic trend. We show that incorporating both an independent trend and cyclical component in consumption improves the efficiency in estimating consumption-based asset pricing models. We also find that the term spread is more informative about future changes in stochastically detrended real gross domestic product (GDP) than future growth rates in real GDP.