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A Spectral-Temporal Index with an Application to U.S. Interest Rates

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  • Lim, G C
  • Martin, Vance L

Abstract

This article presents a flexible, data-analytic procedure for calculating spectral-temporal indexes by exploiting the duality property between frequency and time-domain procedures. The approach consists of capturing the interrelationships between the subordinate series across a range of cycles using a principal-components decomposition in the frequency domain and transforming this information into the time domain to construct a temporal index. The approach is applied to the calculation of an index of U.S. short and long interest rates. The main result of the empirical analysis is that, for a broad range of cycles, a single index can be used to summarize and synthesize the information contained in a range of interest rates differing in terms to maturity.

Suggested Citation

  • Lim, G C & Martin, Vance L, 1994. "A Spectral-Temporal Index with an Application to U.S. Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(1), pages 81-93, January.
    • Handle: RePEc:bes:jnlbes:v:12:y:1994:i:1:p:81-93
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    References listed on IDEAS

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    1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
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    6. Brown, Stephen J & Dybvig, Philip H, 1986. "The Empirical Implications of the Cox, Ingersoll, Ross Theory of the Term Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 41(3), pages 617-630, July.
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