Can US Wage Increases be Regarded as a Leading Indicator for Bond Rates?

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Ekin Ayşe Özşuca Erenoğlu
Elif Öznur Acar


After the subprime meltdown, the Federal Reserve focused its attention on US non-farm payroll data in order to pave the way for its fund rate hikes. As time went by, the Federal Reserve deemed particularly one sub-component of this data, namely the increments on average weekly wage growth as a proxy for inflation and thus a plausible explanation for raising the interest rates. In that aspect, we decide to elaborate on this issue further and examine whether this implemented strategy indeed had a reflection in the real market. For doing so, we intend to determine whether there is any causality relation in either direction between US average weekly wage increases and 10-year Treasury Bond rates. We utilize the Toda-Yamamoto causality approach and come up with a statistically significant result between wages and bond rates. For robustness, we also consider the unemployment rate and consumption expenditures as independent variables.


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Özşuca Erenoğlu, E. A. and Acar, E. (2020) “Can US Wage Increases be Regarded as a Leading Indicator for Bond Rates?”, World Journal of Applied Economics, 6(2), pp. 169-176. doi: 10.22440/wjae.6.2.5.
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