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

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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)

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Javier Gómez Biscarri

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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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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Find related papers by JEL classification:
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications

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