Non-Parametric and Neural Network Models of Inflation Changes

Greg Tkacz ()

Staff Working Papers from Bank of Canada

Abstract: Previous studies have shown that interest rate yield spreads contain useful information about future changes in inflation. However, such studies have for the most part focused on linear models, ignoring potential non-linearities between interest rates and inflation. Using two different non-linear models, we find that the relationship between interest rate yield spreads and inflation changes for policy-relevant horizons in the United States is most pronounced at negative long-short yield spreads, and almost non-existent at positive values of the spread. These findings are consistent with studies noting asymmetric effects of monetary policy on the real economy.

Keywords: Economic models; Inflation and prices (search for similar items in EconPapers)
JEL-codes: C51 E31 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2000
New Economics Papers: this item is included in nep-ets and nep-mon
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:00-7

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