Tactical Macro-Drivers

In this chapter, we lay the foundation for a business cycle approach to TAA which will be elaborated further in Chap. 9. Section 8.2 first outlines standard business cycle analysis and the dating of business cycles. We will then shift our attention to the concept of the output gap and its evolution over time, giving rise to four separate phases for the economy. Section 8.3 discusses the relevance of this to monetary policy and examines how changes in policy rates are reflected in the yield curve.