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Bayesian analysis of the predictive power of the yield curve using a vector autoregressive model with multiple structural breaks

Author

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  • Katsuhiro Sugita

    (Faculty of Law and Letters, University of the Ryukyus)

Abstract

In this paper we analyze the predictive power of the yield curve on output growth using a vector autoregressive model with multiple structural breaks in the intercept term and the volatility. To estimate the model and to detect the number of breaks, we apply a Bayesian approach with Markov chain Monte Carlo algorithm. We find strong evidence of three structural breaks using the US data.

Suggested Citation

  • Katsuhiro Sugita, 2015. "Bayesian analysis of the predictive power of the yield curve using a vector autoregressive model with multiple structural breaks," Economics Bulletin, AccessEcon, vol. 35(3), pages 1867-1873.
    • Handle: RePEc:ebl:ecbull:eb-15-00300
    as

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    References listed on IDEAS

    as
    1. Mishkin, Frederic S., 1990. "What does the term structure tell us about future inflation?," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 77-95, January.
    2. Inclan, Carla, 1993. "Detection of Multiple Changes of Variance Using Posterior Odds," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(3), pages 289-300, July.
    3. Wang, Jiahui & Zivot, Eric, 2000. "A Bayesian Time Series Model of Multiple Structural Changes in Level, Trend, and Variance," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(3), pages 374-386, July.
    4. Arturo Estrella & Anthony P. Rodrigues & Sebastian Schich, 2003. "How Stable is the Predictive Power of the Yield Curve? Evidence from Germany and the United States," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 629-644, August.
    5. repec:ebl:ecbull:v:3:y:2008:i:22:p:1-7 is not listed on IDEAS
    6. Katsuhiro Sugita, 2008. "Bayesian analysis of a vector autoregressive model with multiple structural breaks," Economics Bulletin, AccessEcon, vol. 3(22), pages 1-7.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Bayesian analysis; structural break; Vector autoregressive model; yield curve;
    All these keywords.

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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