An analysis on the accuracy of the yield curve in predicting the Malaysian economy: A 20 years' perspective

Rahman, Maya Puspa (2017) An analysis on the accuracy of the yield curve in predicting the Malaysian economy: A 20 years' perspective. In: The International Conference on Applied Economics and Policy (ICAEP) 2017, 21-22 August 2017, Kuala Lumpur. (Unpublished)

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Abstract

Previous researchers have argued that yield curve contains information for future growth, and to a certain extent, was accurate in predicting recessions through the signal of yield curve inversion. This paper provides new evidence on the long- and short-run relationship between economic growth and yield spread in Malaysia, based on a 20-year span of data ranging from January 1996 to December 2016. By using the autoregressive distributed lag (ARDL) framework, the sample data is divided into three samples after taking into consideration the two major crisis occurred in Malaysia over the last two decades. We find strong evidence of cointegration between the yield spread and growth, concurring on the long-run and short-run dynamics between them. Though significant, the instability of the yield spread to affect the movement of growth does not support the priori expectation on the predictive ability of the yield curve in Malaysia.

Item Type:	Conference or Workshop Item (Slide Presentation)
Additional Information:	7137/64072
Uncontrolled Keywords:	Yield curve; predictive power; ARDL; Malaysia
Subjects:	H Social Sciences > HB Economic Theory > HB3711 Business cycles. Economic fluctuations
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Kulliyyah of Economics and Management Sciences > Department of Economics
Depositing User:	Dr Maya Puspa Rahman
Date Deposited:	28 Jun 2018 09:02
Last Modified:	28 Jun 2018 09:02
URI:	http://irep.iium.edu.my/id/eprint/64072

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