Mario Reyna Cerecero Diana Salazar Cavazos Héctor Salgado Banda
Abstract
There are a significant number of papers that show that the slope of the yield curve has a certain ability to forecast real economic activity and inflation. However, in emerging economies this source of information has not been thoroughly used; Mexico is not an exception. The economic stability achieved in this country in recent years has allowed the government to issue, since 2001,long-term bonds. With more stable economic cycles, the information included in the long part of the yield curve could be a useful tool to estimate future economic activity. This document analyses the predictive power of the spread. Moreover, the spread is divided into two main components to analyse the origin of its predictive power. Next, the power of the spread to forecast economic cycles is tested. Last, out-of-sample tests of the spread are carried out. The findings show that the yield curve provides significant information about future economic activity.
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Publisher Info
Paper provided by Banco de México in its series Working Papers with number
2008-15.
Find related papers by JEL classification: C5 - Mathematical and Quantitative Methods - - Econometric Modeling E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation
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