Which Government Bond Spread Predicts the Future Economic Growth the Best?
|Druh||Článek ve sborníku|
|Konference||Proceedings of the 3rd International Conference on European Integration 2016|
|Fakulta / Pracoviště MU|
|Obor||Řízení, správa a administrativa|
|Klíčová slova||Bond market integration; Slope; Spread; Yield curve|
|Popis||The spread between long term and short term interest rates is a valuable forecasting tool. The steepness of the yield curve should be an excellent indicator of a possible future economic activity. A rise in the short rate tends to flatten the yield curve as well as to slow down real economic growth the near term. The relationship between the spread and future GDP activity was proved already before. One question remains – which spread is the best for the future prediction? Is it the spread between sovereign 10-year bonds and 3-month bonds or 15-year and 3- month or 10-year and 1-year sovereign bonds? This paper aimed to analyze which spread is the most suitable for predicting of future economic growth in countries of V4 (Czech Republic, Hungary, Poland, Slovakia) between the years 2000 and 2015. We proved that in these selected countries the best spread is a spread of 5-year and 3-month government bonds. The second best spread is spread of 5-year and 1-year government bonds. The results show that dividing of the sample made a difference between pre-crisis and after-crisis period and it showed the different relationship of spreads and the models. The finding that the best spread is spread of 5-year and 3-month eventually 5-year and 1-year is in contradiction with the theoretical background when almost everybody who predicts the future GDP growth uses a spread of 10-year and 3-month of government bonds.|