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Asymmetry in the bivariate relationship between output and interest rates

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  • Chan Guk Huh

Abstract

This paper investigates whether an asymmetry is present in the Granger-causal relationship between output and a set of interest rates and their spreads, across expansionary and contractionary business cycle phases in post 1950 U.S. Non-structural VAR models of monthly industrial production and three interest rates and four spreads are estimated for expansion and contraction samples. This study finds asymmetry in the bivariate relationship between the output and the financial variables across the two samples. Most of the interest rates and the spreads that were observed to Granger-cause output in the full sample continues to do so over the expansion sample but lose their predictive power in the contraction samples. ; Earlier version: Asymmetry in the relationship between output and interest rates (Paper no. 93-13)

Suggested Citation

  • Chan Guk Huh, 1994. "Asymmetry in the bivariate relationship between output and interest rates," Working Papers in Applied Economic Theory 94-13, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfap:94-13
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    Cited by:

    1. Chu, Joonsuk & Ratti, Ronald A., 1999. "On the relevance of distinctions between anticipated, unanticipated expansionary, and unanticipated contractionary monetary policy," Journal of Economics and Business, Elsevier, vol. 51(2), pages 109-131, March.
    2. Chan Guk Huh, 1998. "Forecasting industrial production using models with business cycle asymmetry," Economic Review, Federal Reserve Bank of San Francisco, pages 29-41.

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    Keywords

    Interest rates; Business cycles;

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