Testing For Asymmetry In The Link Between The Yield Spread And Output In The G-7 Countries
AbstractThe difference in yields between long-term and short-term securities has been used both as a business cycle leading indicator and as an indicator of the current impact of monetary policy. This paper tests for an asymmetry, in the form of a threshold effect, such that the impact of the yield spread on output is greater on one side of the threshold than the other. The test allows for an unknown threshold, and the asymptotic distribution of the resulting statistic is obtained by the method of Hansen (1996). We test using data from each of the G-7 countries, and find that, while the yield spread does generally show a signifcant link with output, only in the U.S. and Canada is there strong evidence of an asymmetry of this type. The evidence of asymmetry that we find suggests a high value of the threshold in both the U.S. and Canada.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by McGill University, Department of Economics in its series Departmental Working Papers with number 1999-02.
Length: 21 pages
Date of creation: Feb 1999
Date of revision:
Other versions of this item:
- Galbraith, John W. & Tkacz, Greg, 2000. "Testing for asymmetry in the link between the yield spread and output in the G-7 countries," Journal of International Money and Finance, Elsevier, vol. 19(5), pages 657-672, October.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barry Cozier & Greg Tkacz, .
"The Term Structure and Real Activity in Canada,"
94-3, Bank of Canada.
- Ben Bernanke, 1990.
"The Federal Funds Rate and the Channels of Monetary Transnission,"
NBER Working Papers
3487, National Bureau of Economic Research, Inc.
- Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, vol. 82(4), pages 901-21, September.
- Ben S. Bernanke & Alan S. Blinder, 1989. "The federal funds rate and the channels of monetary transmission," Working Papers 89-10, Federal Reserve Bank of Philadelphia.
- M. A. Akhtar, 1995. "Monetary Policy And Long-Term Interest Rates: A Survey Of Empirical Literature," Contemporary Economic Policy, Western Economic Association International, vol. 13(3), pages 110-130, 07.
- Yash P. Mehra, 1996. "Monetary policy and long-term interest rates," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 27-49.
- Estrella, Arturo & Hardouvelis, Gikas A, 1991.
" The Term Structure as a Predictor of Real Economic Activity,"
Journal of Finance,
American Finance Association, vol. 46(2), pages 555-76, June.
- Arturo Estrella & Gikas A. Hardouvelis, 1989. "The term structure as a predictor of real economic activity," Research Paper 8907, Federal Reserve Bank of New York.
- Hansen, Bruce E, 1996.
"Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis,"
Econometric Society, vol. 64(2), pages 413-30, March.
- Tom Doan, . "RATS programs to replicate Hansen's threshold estimation and testing results," Statistical Software Components RTZ00091, Boston College Department of Economics.
- Tom Doan, . "TAR: RATS procedure to estimate a threshold autoregression, tests for threshold effect," Statistical Software Components RTS00209, Boston College Department of Economics.
- Hansen, B.E., 1991. "Inference when a Nuisance Parameter is Not Identified Under the Null Hypothesis," RCER Working Papers 296, University of Rochester - Center for Economic Research (RCER).
- Wesley C. Mitchell & Solomon Fabricant, 1938. "Statistical Indicators of Cyclical Revivals," NBER Books, National Bureau of Economic Research, Inc, number mitc38-1.
- Donald W.K. Andrews, 1990.
"Tests for Parameter Instability and Structural Change with Unknown Change Point,"
Cowles Foundation Discussion Papers
943, Cowles Foundation for Research in Economics, Yale University.
- Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July.
- Karras, Georgios, 1996. "Are the Output Effects of Monetary Policy Asymmetric? Evidence from a Sample of European Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 267-78, May.
- Galbraith, John W, 1996. "Credit Rationing and Threshold Effects in the Relation between Money and Output," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 419-29, July-Aug..
- Cover, James Peery, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1261-82, November.
- Donald P. Morgan, 1993. "Asymmetric effects of monetary policy," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 21-33.
- Alan S. Blinder, 1996. "Central banking in a democracy," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 1-14.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shama Rangwala) The email address of this maintainer does not seem to be valid anymore. Please ask Shama Rangwala to update the entry or send us the correct address.
If references are entirely missing, you can add them using this form.