The Term Structure and Real Activity in Canada

Résumé du livre

This paper examines the predictive content of the term structure of interest rates for economic activity in Canada. Using the theoretical framework provided in the paper, it examines the conditions under which the term spread would better reflect the stance of monetary policy than a short-term interest rate and argues that these conditions are likely to be satisfied in the data. It also evaluates the predictive power of the term structure relative to other common financial variables, namely, the level of interest rates, real M1, stock prices and the profit rate. It assesses the predictive power of the Canadian term structure for Canadian real activity relative to the U.S. term structure.