Predictive power of yield curve – Evidence from India. Issue 1 (March 2022)

• Record Type: Journal Article
• Authors: Krishna, Geetima Das; Nag, Biswajit
• Is Part Of: IIMB management review. Volume 34:Issue 1(2022)
• Page Start: 54
• Page End: 67
• Publication Date: 2022-03
• Subjects: Yield curve -- Yield spread -- CILI -- Business cycle -- Probit -- Leading indicator -- Predictive power -- Term structure; Management -- Periodicals; Industrial management -- Periodicals; Industrial management; Management; India; Periodicals; 658
• DOI: 10.1016/j.iimb.2022.03.001
• Languages: English
• ISSNs: 0970-3896

Abstract

Abstract: In this paper, we explore the predictive ability of the slope of the sovereign (government) yield curve for the Indian market. Instead of simply showing the predictive power of the yield curve, an attempt has been made to compare the predictive power of the yield curve slope with an estimated composite index of lead indicators (CILI) constructed with potential high frequency lead indicators. The non-agricultural GDP (NAGDP) is used as the reference series. It is observed that the slope of the yield curve is a better predictor of the turning points of the reference series compared to the CILI constructed.