The abstract was based on the evidence that yield spread can serve as a leading indicator of economic activity.It’s important to understand few basic concepts before moving forward:
YIELD SPREAD: The difference between yield of long-term debt and short-term debt instrument is known as yield spread. Higher the difference between instruments greater will be the yield spread.
For example, if the 05-year Treasury bond is at 3% and the 20-year Treasury bond is at 4%, the yield spread between the two debt instruments is 1% (4% – 3%). Continue reading “Economic Growth and Yield Spreads on Debt paper – Back to School”