An analysis of the yield spread as a predictor of inflation in Brazil: evidence from

• Autor(a) principal: Tabak, Benjamin Miranda
• Data de Publicação: 2009
• Outros Autores: Feitosa, Mateus Araujo
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Institucional da UCB
• Texto Completo: http://twingo.ucb.br:8080/jspui/handle/10869/630; https://repositorio.ucb.br:9443/jspui/handle/123456789/7793
• topic: Interest rates; Forecasts; Multiresolution analysis; Wavelets; Yield spread; Term structure of interest rates

In the present paper we apply multiresolution decomposition in order to test if the Brazilian yield spread has informational content in the prediction of inflation. Additionally, we investigate the effect of the implementation of inflation targeting regime over this relation. The results suggest that the predictive power of the spread varies across time patterns. Inasmuch, the results indicate that the implementation of the inflation target regime was a sine qua non condition for a substantial increase in the predictive power of inflation. Overall, results suggest that wavelets transformations may be very useful in the building of forecasts of important financial variables.