On the Predictive Power of Yield Spread for Future Growth and Recession: The Turkish Case

Huseyin Kaya

No 10, Working Papers from Bahcesehir University, Betam

Abstract: This paper investigates the predictive power of the yield spread on future industrial production growth and recession in Turkey. Employing the linear regression model we find that the yield spread has predictive power when forecasting industrial production growth. The results also suggest that in the inflation targeting monetary policy period, predictive power of the yield spread has increased. Furthermore, we investigate whether the yield spread predicts recession by employing a probit model. Since no official recessions are available in Turkey, we determine the recessions using the BBQ methodology. The findings suggest that the yield spread predicts the recessions about one year ahead.

Keywords: yield curve; recession; growth; forecast (search for similar items in EconPapers)
JEL-codes: C22 E37 E43 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2013-03, Revised 2013-03
New Economics Papers: this item is included in nep-ara and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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