The Yield Spread and Inflation as Economic Forecasting Variables in the UK

Abstract: The thesis investigates the possibility of predicting future economic activity using the yield spread of a UK Treasury bond and bill, and a inflation variable. To investigate this matter, this paper uses the theoretical framework of the relationship between the term structure and economic growth. It is found that the chosen yield spread on its on holds some significance in forecasting future quarters of economic movement, whereas the inflation variable holds less significance