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The Relation between the Corporate Bond-Yield Spread and the Real Economy: Stable or TimeVarying?
Örebro University, Örebro University School of Business.ORCID iD: 0000-0003-0203-4688
Örebro University, Örebro University School of Business.ORCID iD: 0000-0002-4840-7649
2019 (English)Report (Other academic)
Abstract [en]

In this paper we assess whether the relation between the corporate bond-yield spread and the real economy has been stable over time. Using quarterly US data from 1953Q1 to 2018Q2, we estimate Bayesian VAR models which allow for drifting parameters and/or stochastic volatility and conduct formal model selection in a Bayesian setting. Our results indicate that the relation between the variables has been stable; we do, however, find strong support for stochastic volatility. We conclude that the corporate bond-yield spread’s usefulness for predicting real economic activity has not changed to a relevant extent after the Great Recession.

Place, publisher, year, edition, pages
Örebro, Sweden: Örebro University, School of Business , 2019. , p. 9
Series
Working Papers, School of Business, ISSN 1403-0586 ; 2019:7
Keywords [en]
Bayesian VAR, Time-varying parameters, Stochastic volatility, Model selection
National Category
Probability Theory and Statistics Economics
Research subject
Statistics; Economics
Identifiers
URN: urn:nbn:se:oru:diva-78300OAI: oai:DiVA.org:oru-78300DiVA, id: diva2:1374382
Funder
The Jan Wallander and Tom Hedelius Foundation, P18-0201Available from: 2019-11-29 Created: 2019-11-29 Last updated: 2019-12-03Bibliographically approved

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The Relation between the Corporate Bond-Yield Spread and the Real Economy

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Karlsson, SuneÖsterholm, Pär

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  • en-US
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  • nn-NB
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  • Other locale
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  • asciidoc
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