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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.

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  • 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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    7. Chiara Perricone, 2018. "Wavelet analysis for temporal disaggregation," CEIS Research Paper 444, Tor Vergata University, CEIS, revised 29 Oct 2018.
    8. Ferraresi Tommaso & Roventini Andrea & Semmler Willi, 2019. "Macroeconomic Regimes, Technological Shocks and Employment Dynamics," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 239(4), pages 599-625, August.
    9. Younis, Ijaz & Shah, Waheed Ullah & Yousaf, Imran, 2023. "Static and dynamic linkages between oil, gold and global equity markets in various crisis episodes: Evidence from the Wavelet TVP-VAR," Resources Policy, Elsevier, vol. 80(C).
    10. João Martins, 2022. "Bond Yields Movement Similarities and Synchronization in the G7: A Time–Frequency Analysis," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 18(2), pages 189-214, July.
    11. Mustapha Olalekan Ojo & Luís Aguiar-Conraria & Maria Joana Soares, 2020. "A time–frequency analysis of the Canadian macroeconomy and the yield curve," Empirical Economics, Springer, vol. 58(5), pages 2333-2351, May.
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