The Role of Financial Spreads: Empirical Analysis of Spreads and Real Activity
AbstractThe issues of interpretation and estimation of VAR models of output which use financial spreads as indicators are reviewed and new empirical evidence is provided using U.K. data. The principal extensions to the existing U.S. literature are estimation of the role of spreads in the context of a cointegrating model as well as a dynamic VAR, and also use of the reverse yield gap (bond yield less equity yield) as an alternative indicator to traditional spreads such as the yield gap and credit quality spread. The evidence presented suggests financial spreads may have an important indicator function in the U.K., especially in predicting short-run movements in the real economy. Copyright 1994 by Blackwell Publishers Ltd and The Victoria University of Manchester
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Bibliographic InfoArticle provided by University of Manchester in its journal The Manchester School of Economic & Social Studies.
Volume (Year): 62 (1994)
Issue (Month): 4 (December)
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Web page: http://www.socialsciences.manchester.ac.uk/disciplines/economics/
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- Andrea Nobili, 2005. "Forecasting Output Growth And Inflation In The Euro Area: Are Financial Spreads Useful?," Temi di discussione (Economic working papers) 544, Bank of Italy, Economic Research and International Relations Area.
- Fabio ALESSANDRINI, 2003. "Do Financial Variables Provide Information about the Swiss Business Cycle ?," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 03.02, Université de Lausanne, Faculté des HEC, DEEP.
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