A yield spread perspective on the great financial crisis: break-point test evidence
AbstractWe use a simple partial adjustment econometric framework to investigate the effects of the crisis on the dynamic properties of a number of yield spreads. We find that the crisis has caused substantial disruptions revealed by changes in the persistence of the shocks to spreads as much as by in their unconditional mean levels. Formal breakpoint tests confirm that the financial crisis has been over approximately since the Spring of 2009. The financial crisis can be conservatively dated as a August 2007 – June 2009 phenomenon, although some yield spread series seem to point out to an end of the most serious disruptions as early as in December 2008. We uncover evidence that the LSAP program implemented by the Fed in the US residential mortgage market has been effective, in the sense that the risk premia in this market have been uniquely shielded from the disruptive effects of the crisis.
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Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2010-026.
Date of creation: 2010
Date of revision:
Other versions of this item:
- Guidolin, Massimo & Tam, Yu Man, 2013. "A yield spread perspective on the great financial crisis: Break-point test evidence," International Review of Financial Analysis, Elsevier, vol. 26(C), pages 18-39.
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
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- Massimo Guidolin & Francesco Ravazzolo & Andrea Donato Tortora, 2011.
"Myths and facts about the alleged over-pricing of U.S. real estate. Evidence from multi-factor asset pricing models of REIT returns,"
2011/19, Norges Bank.
- Massimo Guidolin & Francesco Ravazzolo & Andrea Donato Tortora, 2011. "Myths and Facts about the Alleged Over-Pricing of U.S. Real Estate. Evidence from Multi-Factor Asset Pricing Models of REIT Returns," Working Papers 416, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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