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Do corporate credit spreads predict the real economy?

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  • Chatterjee, Ujjal Kanti
  • Bazzana, Flavio
Abstract
We evaluate whether corporate credit-spreads measures contain predictive information about the real U.S. economy in a comprehensive specification that includes financial sectors’ profitability, stock and bond market. We find that corporate credit spreads contain no predictive information about U.S. real GDP or consumption and that corporate credit spreads have minimal information about forthcoming recessions. In comparison, the financial sector’s profitability, the Treasury bond and stock market variables contain leading information about recessions, consumption and real GDP.

Suggested Citation

  • Chatterjee, Ujjal Kanti & Bazzana, Flavio, 2024. "Do corporate credit spreads predict the real economy?," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 272-286.
    • Handle: RePEc:eee:reveco:v:91:y:2024:i:c:p:272-286
    DOI: 10.1016/j.iref.2024.01.061
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    More about this item

    Keywords

    Business cycles; Real GDP; Corporate credit-spreads; Stock trading activities; Supply of credit;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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