The ability of term spread to forecast U.S. output growth could be improved by two ways: (i) Combining with the Harrod-Domar variable - net saving as a percentage of gross national income - that used to proxy for aggregate supply; and (ii) Using a system of simultaneous equations, in which U.S....

This paper modifies a P-star model to forecast inflation using an argument that is in line with the concept of “price gap”. Liquid assets such as government bonds are also included to measure money demand for asset transaction. The out-of-sample forecast results show that, at least since the...