DP1264 The Information Content of the Term Structure: Evidence for Germany

Author(s): Stefan Gerlach
Publication Date: November 1995
Keyword(s): Inflation Expectations, Information Content, Term Structure
JEL(s): E43, E52
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1264

This paper studies the usefulness of spreads between interest rates of different maturities as indicators of future inflation and real interest rates in Germany, using monthly data from the first quarter of 1967. The central results are two-fold. First, the interest rate spreads considered contain considerable information about future changes in inflation, but no information about the time path of real interest rates. Second, the medium-term segment of the yield curve (spreads between six- and two-year rates, for instance) appears to be the most informative for future inflation. These results are similar to those obtained by Mishkin (1990b) and Jorion and Mishkin (1991).