Economics, Econometrics and Finance
4 years ago

Interest rate variability linked to industrial production reductions, study finds.

SSRN Electronic Journal
Yield Spreads as Predictors of Industrial Production: Expectations on Short Rates or Term Premia?
Walid Hejazi

Paper Summary

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The study looked at how changes in interest rates can predict changes in industrial production in the US. They found that increases in interest rate variability are linked to decreases in industrial production. This relationship was stronger when looking at term premia, which are estimates of future interest rate movements, rather than just T-bill spreads. This suggests that fluctuations in interest rates can impact industrial production levels.