This note analyzes the yield-curve predictability for GDP growth by modifying the time-series property of the interest rate process in Ang, Piazzesi, and Wei (2006). When interest rates have a unit root and term spreads are stationary, the short rate's forecasting role changes, and the combined...

Using a macroeconomic perspective, we examine the effect of uncertainty arising from policy-shock volatility on yield-curve dynamics. Many macro-finance models assume that policy shocks are homoskedastic, while observed policy shock processes are significantly time varying and persistent. We...