Table of Contents
Economics Research International
Volume 2015 (2015), Article ID 308567, 12 pages
http://dx.doi.org/10.1155/2015/308567
Research Article

In Search of Leading Indicator Property of Yield Spread for India: An Approach Based on Quantile and Wavelet Regression

1Department of Economic Environment and Strategy, IMT, Ghaziabad 201001, India
2Department of Mathematics, University of Kashmir, South Campus, Anantnag, Jammu and Kashmir 192101, India

Received 2 June 2014; Accepted 10 December 2014

Academic Editor: Raouf Boucekkine

Copyright © 2015 Arif Billah Dar and Firdous Ahmad Shah. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

The leading indicator ability of yield spread for future output growth and inflation is tested for India. Using the yields on securities with maturities ten years and three months to construct yield spread, we study the predictive power of yield spread for output growth and inflation. Our results based on regression of future inflation and output on yield spreads indicate that there is no information in the yield spread about future economic activity and inflation in India. Further, the predictive power of yield spread is analyzed over different quantiles of inflation and output growth using quantile regression; we find that there is again no evidence of predictive information in the yield spreads. Using multiscale wavelet based regression, predictive power is however unveiled at higher time scales for output growth only.