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Interest rate spreads and output: A time scale decomposition analysis using wavelets

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  • Gallegati, Marco
  • Ramsey, James B.
  • Semmler, Willi

Abstract

The information content of several interest rate spreads for future output growth is analyzed using wavelet analysis. The “scale-by-scale” regression analysis shows that standard indicators of the stance of monetary policy, such as the shape of the yield curve, the real federal funds rate, and the credit spread have different information content for future output at different time frames. This is consistent with the idea that allowing for different time scales of variation in the data can provide a deeper understanding of the complex dynamics between real and financial variables, certainly richer than those obtainable using standard aggregate regression methods.

Suggested Citation

  • Gallegati, Marco & Ramsey, James B. & Semmler, Willi, 2014. "Interest rate spreads and output: A time scale decomposition analysis using wavelets," Computational Statistics & Data Analysis, Elsevier, vol. 76(C), pages 283-290.
  • Handle: RePEc:eee:csdana:v:76:y:2014:i:c:p:283-290
    DOI: 10.1016/j.csda.2014.02.024
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:ecmode:v:64:y:2017:i:c:p:312-321 is not listed on IDEAS
    2. Mustapha Olalekan Ojo & Luís Aguiar-Conraria & Maria Joana Soares, 2017. "A time-frequency analysis of the Canadian macroeconomy and the yield curve," NIPE Working Papers 12/2017, NIPE - Universidade do Minho.
    3. He, Kaijian & Xu, Yang & Zou, Yingchao & Tang, Ling, 2015. "Electricity price forecasts using a Curvelet denoising based approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 425(C), pages 1-9.
    4. Bouoiyour, Jamal & Selmi, Refk & Tiwari, Aviral Kumar & Shahbaz, Muhammad, 2015. "The nexus between oil price and Russia's real exchange rate: Better paths via unconditional vs conditional analysis," Energy Economics, Elsevier, vol. 51(C), pages 54-66.
    5. Liu, Xueyong & An, Haizhong & Huang, Shupei & Wen, Shaobo, 2017. "The evolution of spillover effects between oil and stock markets across multi-scales using a wavelet-based GARCH–BEKK model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 465(C), pages 374-383.
    6. António Rua, 2016. "A wavelet-based multivariate multiscale approach for forecasting," Working Papers w201612, Banco de Portugal, Economics and Research Department.
    7. repec:eee:intfor:v:33:y:2017:i:3:p:581-590 is not listed on IDEAS

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