Download or read book The Predictive Power of the Yield Curve in the Low Interest Rate Environment written by Nanshan Xu and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper re-examines the use of the yield curve as a forecasting tool for future real GDP growth in the United States. I identify a structural break in the term spread that is consistent with past literature findings. I examine the stability of the predictive power using multiple autoregressive models with three subsamples. My results indicate a strong predictive relationship between the term spread and real economic activity before 1982 third quarter, but that no statistically significant evidence has been found after 1982 third quarter. Using a disaggregate approach, I suggest that the yield curve still holds consistently strong predictive power in future nondurable goods consumption and non-residential investment growth. My analysis indicates how the yield curve may reflect the transmission channel: how monetary policy can impact consumption and investment, and hence real GDP.