Applying multiple regression and GARCH(1,1) to the data spanning from 1961.Q1 to 2011.Q3, this study detects the impact of interest rate spreads on economic growth and its volatility with inflation and money supply growth treated as control variables. Evidence from estimating multiple regression and GARCH(1,1) models indicates that, as are found from current literature, the interest rate spread lagged in one quarter is significantly positively correlated with economic growth. The positive correlation has shown a tendency to weaken over time and it could even have become negative correlation in the first decade of the 21st century. Evidence from estimating GARCH(1,1) models further indicates that the lagged interest rate spread by one quarter showed a significantly negative effect on volatility in economic growth, even though the volatility clustering effect has been considered.
