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Prediction of the economic activity from the short and long-term interest rate differential: new evidences in Chile and the United States of America cases

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  • David Cademartori
  • Rodrigo Navia
  • Manuel Galea
  • Felipe Osorio

Abstract

The purpose of this work is to verify the stability of the relationship between real activity and interest rate spread. The test is based on Chen (1988) and Osorio and Galea (2006). The analysis is applied to Chile and the United States, from 1980 to 1999. In general, in both cases the relationship was statistically significant in early 80s, but a break point is found in both countries during that decades, suggesting that the relationship depends on the monetary rule follow by the Central Bank.

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  • David Cademartori & Rodrigo Navia & Manuel Galea & Felipe Osorio, 2008. "Prediction of the economic activity from the short and long-term interest rate differential: new evidences in Chile and the United States of America cases," Applied Economics Letters, Taylor & Francis Journals, vol. 15(9), pages 707-712.
    • Handle: RePEc:taf:apeclt:v:15:y:2008:i:9:p:707-712
    DOI: 10.1080/13504850600748950
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    References listed on IDEAS

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    1. Estrella, Arturo & Mishkin, Frederic S., 1997. "The predictive power of the term structure of interest rates in Europe and the United States: Implications for the European Central Bank," European Economic Review, Elsevier, vol. 41(7), pages 1375-1401, July.
    2. Blattberg, Robert C & Gonedes, Nicholas J, 1974. "A Comparison of the Stable and Student Distributions as Statistical Models for Stock Prices," The Journal of Business, University of Chicago Press, vol. 47(2), pages 244-280, April.
    3. Estrella, Arturo & Hardouvelis, Gikas A, 1991. "The Term Structure as a Predictor of Real Economic Activity," Journal of Finance, American Finance Association, vol. 46(2), pages 555-576, June.
    4. David McMillan, 2002. "Interest rate spread and real activity: evidence for the UK," Applied Economics Letters, Taylor & Francis Journals, vol. 9(3), pages 191-194.
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    Cited by:

    1. Natalya Ayzenberg & Igor Bykadorov & Sergey Kokovin, 2018. "Optimal Reciprocal Import Tariffs Under Variable Elasticity Of Substitution," HSE Working papers WP BRP 204/EC/2018, National Research University Higher School of Economics.

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