In this paper we examine the explanatory and predictive power of interest rate volatility on the economic agent expectations measured by the Economic Sentiment Indicator (ESI), which is elaborated by the European Commission as a leading indicator of business cycle. In particular, we use implicit...

One explanation for the usefulness of financial variables as tools for economic forecasting is that they embody the expectations of economic agents about the future state of the economy. In this paper, we test whether interest rate volatility contains information on the expectations of agents...

Many papers have documented the positive relationship between the slope of the yield curve and future real economic activity in different countries and different time periods. One explanation for this economic link is based on monetary policy. However, empirical evidence (Estrella and...