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Non-Parametric and Neural Network Models of Inflation Changes

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  • Tkacz, Greg

Abstract

Previous studies have shown that interest rate yield spreads contain useful information about future changes in inflation. However, such studies have for the most part focused on linear models, ignoring potential non-linearities between interest rates and inflation. Using two different non-linear models, we find that the relationship between interest rate yield spreads and inflation changes for policy-relevant horizons in the United States is most pronounced at negative long-short yield spreads, and almost non-existent at positive values of the spread. These findings are consistent with studies noting asymmetric effects of monetary policy on the real economy.

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Bibliographic Info

Paper provided by Bank of Canada in its series Working Papers with number 00-7.

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Length: 26 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:bca:bocawp:00-7

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Keywords: Economic models; Inflation and prices;

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Cited by:
  1. Martha Misas & Enrique López & Pablo Querubín, . "La Inflación en Colombia: Una Aproximación desde las Redes Neuronales," Borradores de Economia 199, Banco de la Republica de Colombia.
  2. Peter Sephton, 2005. "Forecasting inflation using the term structure and MARS," Applied Economics Letters, Taylor & Francis Journals, vol. 12(4), pages 199-202.
  3. Greg Tkacz, 2002. "Inflation Changes, Yield Spreads, and Threshold Effects," Working Papers 02-40, Bank of Canada.

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