Recessions in Portugal: The Predictive Power of Term Structure of Interest Rates Components

Conference proceedings article


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Publication Details

Author list: Maldonado, I. & Pinho, C.
Publisher: EDIS - Publishing Institution of the University of Zilina
Publication year: 2018
Start page: 66
End page: 71
Number of pages: 6
ISBN: 978-80-554-1436-2
Languages: English-Great Britain (EN-GB)


Abstract

In this paper we present a study of the predictive

ability of the term structure of interest rates over future

recessions in Portugal. The analysis will be based on factor

models in which the term structure of interest rates is determined

by latent factors, corresponding to their level, slope and

curvature. Simple and modified probit and logit models will be

used to examine the forecasting ability of term structure in

predicting economic crises (recessions). Recession periods were

determined based on the methodology proposed by Bry and

Boschan. Our results suggest that all term structure of interest

rates components allow to predict recessions in one-year time

horizons, with an increase in adjustment quality when we include

an autoregressive term as the explanatory variable.


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Last updated on 2019-13-08 at 00:46