scholarly journals The Predictive Power of the Yield Spread Under the Veil of Time

2006 ◽  
Author(s):  
Paolo Zagaglia
Author(s):  
Hüseyin Kaya

This paper investigates the predictive power of the yield spread on future industrial production growth and recession in Turkey. Employing the linear regression model we find that the yield spread has predictive power when forecasting industrial production growth. The results also suggest that in the inflation targeting monetary policy period, predictive power of the yield spread has increased. Furthermore, we investigate whether the yield spread predicts recession by employing a probit model. Since no official recessions are available in Turkey, we determine the recessions using the BBQ methodology. The findings suggest that the yield spread predicts the recessions about one year ahead.


2014 ◽  
Vol 12 (1) ◽  
pp. 325-329 ◽  
Author(s):  
Andre Carvalhal ◽  
Miguel Murillo

This paper uses a forecasting model for real economic activity for a group of emerging economies (Brazil, India, Mexico and Russia) based on the information contained in their capital markets. We forecast the industrial production in emerging markets throughout different time horizons using information contained in stock and fixed-income markets. Our results suggest that fixed-income and stock markets do not reveal information regarding future economic growth in Brazil, Mexico and Russia. In the case of India, the yield spread explain part of the variation of the economic activity, but the stock market does not have predictive power.


2013 ◽  
Vol 46 (3) ◽  
pp. 887-901 ◽  
Author(s):  
Arif Billah Dar ◽  
Amaresh Samantaraya ◽  
Firdous Ahmad Shah

2015 ◽  
Vol 2015 ◽  
pp. 1-12 ◽  
Author(s):  
Arif Billah Dar ◽  
Firdous Ahmad Shah

The leading indicator ability of yield spread for future output growth and inflation is tested for India. Using the yields on securities with maturities ten years and three months to construct yield spread, we study the predictive power of yield spread for output growth and inflation. Our results based on regression of future inflation and output on yield spreads indicate that there is no information in the yield spread about future economic activity and inflation in India. Further, the predictive power of yield spread is analyzed over different quantiles of inflation and output growth using quantile regression; we find that there is again no evidence of predictive information in the yield spreads. Using multiscale wavelet based regression, predictive power is however unveiled at higher time scales for output growth only.


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