The paper-bill spread and real output: What matters more, a change in the paper rate or a change in the bill rate?

Bradley T. Ewing, Gerald J. Lynch, James E. Payne

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

This paper adds to the literature on the information content of the paper-bill spread by explicitly taking into account the two sources of wider spreads, rises in the paper rate and declines in the bill rate. Results from impulse response analysis and variance decompositions suggest that decreases in real output are greater and last longer when a widening of the paper-bill spread comes from an increase in the paper rate rather than from an equivalent decrease in the bill rate. This is consistent with the idea that changes in the commercial paper rate have greater information content about future business cycles than do changes in the Treasury bill rate.

Original languageEnglish
Pages (from-to)233-246
Number of pages14
JournalReview of Financial Economics
Volume12
Issue number3
DOIs
StatePublished - 2003

Keywords

  • Bill rate
  • Paper rate
  • Paper-bill spread

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