Interest rates predict economic growth better than traditional measures.
The article explores how interest rates change during different economic periods. Instead of just looking at overall economic growth, the researchers also consider how far the economy is from its usual path. By including both a long-term trend and short-term fluctuations in spending, they can better predict how assets are priced. They discovered that the difference between short-term and long-term interest rates can tell us more about future changes in the economy than just looking at growth rates.