The Term Structure Of Interest Rate As A Predictor Of Inflation And Real Economic Activity: Nonlinear Evidence From Turkey
This paper investigates whether the term structure of interest rates contains useful information about future real economic activity and inflation in Turkey during the 1991:7-2004:3 periods. In order to analyze these relationships, the authors have employed the Generalized Impulse Response (GIRF) analysis to the Logistic Smooth Transition Vector Autoregressive (LSTVAR) model. They have determined that the results of a GIRF analysis are consistent with the recursive Chow test and parameter stability tests. Besides, they have found out that the relationships between spread real economic activity and spread-inflation are negative. These negative relationships have also been examined by GIRF analysis; because of a negative reverse relationship between Expectation Hypothesis and Interest Transmission Channel, a negative correlation between real economic activity and spread has occurred.