Search

According to Harvey (1988) , the forecasting ability of the term spread on economic growth is due to the fact that interest rates reflect investors' expectations about the future economic situation when deciding their plans for consumption and investment. Past literature has used ex post data on output or consumption growth as proxies for their expected value. In this paper, we employ a direct measure of economic agents' expectations, the Economic Sentiment Indicator elaborated by the European Commission, to test this hypothesis. Our results indicate that a linear combination of European yield spreads explains a surprising 93.7\% of the variability of the Economic Sentiment Indicator. This ability of yield spreads to capture economic agent expectations may be the actual reason for the predictive power of yield spreads about future business cycle. [ABSTRACT FROM AUTHOR]

The article examines the history of European economic growth during the period 1450-1750. According to the new school of development history, the critical period when different parts of the world set off along contrasting paths of economic growth occurred between 1450 and 1750, three centuries which witnessed the emergence and consolidation of European world economy based upon the capitalist mode of production. The evolution of trade and commerce under this old international economic order created conditions for development and underdevelopment in the nineteenth and twentieth centuries. A striking feature of the new history of development is the absence of systematic statistical underpinning for several of its basic hypotheses. An important omission is its failure to measure the economic significance of intercontinental trade. External trade formed only a small share of economic activity. Around 1780-1790 when something like 4 percent of Europe's gross national output was exported across national frontiers, perhaps less than 1 percent would have been sold to Africa, Asia, Latin America, the Caribbean and the southern plantations of the young U.S.