The Yield Curve as a Predictor of Economic Activity in Mexico: The Role of the Term Premium
No 2021-07, Working Papers from Banco de México
This paper analyzes whether there exists a relationship between the slope of the yield curve and future economic activity in Mexico for the period 2004-2019. In particular, we evaluate whether such relationship depends on the term premium. For this purpose, we estimate a threshold model in which the relationship between the yield spread and future economic activity, measured as either output growth or the probability of a contraction, depends on whether the term premium is above or below an estimated threshold. The main results indicate that the slope of the yield curve seems to anticipate the behavior of economic activity only when the term premium is above a threshold. Our results also suggest that the slope of the yield curve has predictive power over the probability of facing a contraction in the future only when the term premium is above a threshold. The estimated value for such threshold depends on the forecast horizon and the measure of economic activity.
JEL-codes: C53 E32 E37 E43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cwa, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.banxico.org.mx/publicaciones-y-prensa/ ... -89ADC7773ABD%7D.pdf (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bdm:wpaper:2021-07
Access Statistics for this paper
More papers in Working Papers from Banco de México Contact information at EDIRC.
Bibliographic data for series maintained by Dirección de Sistemas ( this e-mail address is bad, please contact ).