Interest rate spreads and output: A time scale decomposition analysis using wavelets |
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| Affiliation: | 1. Department of Economics and Social Sciences, Polytechnic University of Marche, Italy;2. Department of Economics, New York University, USA;3. Department of Economics, New School for Social Research, New School University, USA;1. Department of Surgery and Cancer, Department of Bioengineering, Faculty of Medicine, Imperial College London, Charing Cross Hospital, London W6 8RF, United Kingdom;2. Information Technology Department, ATEI of Thessaloniki, Sindos 57400, Greece;1. College of Astronautics, Northwestern Polytechnical University, Xi׳an 710072, China;2. Department of Civil Engineering, National Taiwan University, Taipei, Taiwan;1. Department of Electrical Engineering, National Changhua University of Education, Changhua, Taiwan;2. Department of Economics, Allameh Tabataba’i University, Tehran, Iran;3. Trade Promotion Organization of Iran, Tehran, Iran;4. Department of Finance, Feng Chia University, Taichung, Taiwan;1. Department of Finance, Insurance, and Real Estate, FSA ULaval, Université Laval, 2325 rue de la Terrasse, Pavillon Palasis-Prince, Université Laval, Quebec City, QC, Canada G1H 3V8;2. Department of Management, FSA ULaval, Université Laval, Canada;3. Dyson School of Applied Economics, College of Business, Cornell University, USA;4. Department of Agricultural Economics, Texas A&M University, USA |
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| 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. |
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| Keywords: | Wavelets Time scales Interest rate spreads Output growth |
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