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Predicting Output Growth and Inflation in Pakistan: The Role of Yield Spread

Author

Listed:
  • Fida Hussain

    (State Bank of Pakistan)

  • Asif Mahmood

    (State Bank of Pakistan)

Abstract

This paper presents empirical evidence on the role of yield spread in predicting inflation and output growth in Pakistan. We also test the role of foreign interest rates in predicting inflation and output growth. Our results indicate that the yield spread in Pakistan does contain information to help predict output growth in the country. However, yield spread has no predictive content for inflation. Our results, for output growth as well as inflation, are consistent with findings of other studies for the case of emerging market economies.

Suggested Citation

  • Fida Hussain & Asif Mahmood, 2017. "Predicting Output Growth and Inflation in Pakistan: The Role of Yield Spread," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 13, pages 53-76.
    • Handle: RePEc:sbp:journl:69
    as

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    File URL: http://www.sbp.org.pk/research/bulletin/2017/Vol-13.1/Paper-03-2017.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Yield Curve; Inflation; Output; Forecasting;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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