New study finds traditional economic forecasting tool ineffective in predicting growth.
The article examines how Treasury bond yields can predict economic growth and inflation. By breaking down the term spread into different components and using a new forecasting method called Support Vector Regression, the researchers found that neither the term spread nor its components can accurately forecast economic indicators. This study is unique because it evaluates forecasts out-of-sample, unlike most previous studies. The introduction of the Support Vector Machine methodology is a novel approach in this field of research.