The cyclical properties of consumption growth and the real term structure

Expected real yields on nominally risk-free bonds and expected consumption growth at horizons from one-quarter to two years are identified using time series models, and their basic propel-ties are examined. The principal results are: (1) real yields and consumption growth are (weakly) negatively correlated over the full sample period of 1953-1991; (2) excluding the 1979-1985 sub-period, real yields and consumption growth are (strongly) positively correlated; (3) the cyclical properties of real yields and consumption growth are qualitatively similar in the pre-1979 data, and they are consistent with a simple real business cycle model.