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Revisiting the Ability of Interest Rate Spreads to Predict Recessions: Evidence for a

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  • Esther Fernández Galar

    ()
    (BBVA – Escuela de Finanzas)

  • Javier Gómez Biscarri

    ()
    (School of Economics and Business Administration, University of Navarra)

Abstract

In this paper we examine the power of the interest rate spread and of other financial variables as predictors of economic recessions in Spain. The domestic term spread is found to have little information about future real activity. However, term spreads in big economies to which Spain is related, specifically Germany and the US, are found to have significant predicting power but at different time horizons. Both these findings are in line with the facts that the monetary policy of Spain has not been independent and that it has been conditioned by that of other big economies, most notably Germany.

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File URL: http://www.unav.es/facultad/econom/files/workingpapersmodule/@random437a048e3df62/1132243576_wp0403.pdf
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Bibliographic Info

Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 04/03.

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Length: 45 pages pages
Date of creation: Jan 2003
Date of revision:
Handle: RePEc:una:unccee:wp0403

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Web page: http://www.unav.es/facultad/econom

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  12. Estrella, Arturo & Mishkin, Frederic S., 1997. "The predictive power of the term structure of interest rates in Europe and the United States: Implications for the European Central Bank," European Economic Review, Elsevier, vol. 41(7), pages 1375-1401, July.
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