Advanced Search
MyIDEAS: Login to save this paper or follow this series

Changes in the Informational Content of the Spread: Is Monetary Policy Becoming Less Effective?

Contents:

Author Info

  • Javier Gómez

    ()
    (IESE, Universidad de Navarra)

Registered author(s):

    Abstract

    We examine how the predictive power of term spreads as predictors of economic recessions in Europe and the US has changed in the last two decades. In particular, we focus on the power of domestic and of US and German term spreads to predict real economic activity. Using a battery of methodologies that include endogenous changepoint detection we find that the predictive power of spreadtype variables has changed significantly after the 1980s: in the most advanced countries the domestic spread has lost its informative content in favor of the US spread, whereas in other, less developed countries, this informational content has appeared during the late 1980s. Other predictive variables examined are shown to add little information over term spreads. Given the theoretical arguments that support the predictive power, these findings suggest that domestic monetary policy may have become less effective with respect to real activity in the most developed countries of the sample.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.unav.es/facultad/econom/files/workingpapersmodule/@random45ab5988c3bf2/1186653865_wp0507.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 05/07.

    as in new window
    Length: 35 pages
    Date of creation:
    Date of revision:
    Publication status: Published, Journal of Economics and Business 60 (2008), 415–435
    Handle: RePEc:una:unccee:wp0507

    Contact details of provider:
    Web page: http://www.unav.es/facultad/econom

    Related research

    Keywords: Interest Rate Spread; Recession; Forecast; Europe;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Eric M. Leeper & Tao Zha, 2001. "Assessing simple policy rules: a view from a complete macroeconomic model," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 83-112.
    2. Arturo Estrella & Anthony P. Rodrigues, 1998. "Consistent covariance matrix estimation in probit models with autocorrelated errors," Staff Reports 39, Federal Reserve Bank of New York.
    3. Arturo Estrella & Anthony P. Rodrigues & Sebastian Schich, 2003. "How Stable is the Predictive Power of the Yield Curve? Evidence from Germany and the United States," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 629-644, August.
    4. Atta-Mensah, Joseph & Tkacz, Greg, 1998. "Predicting Canadian Recessions Using Financial Variables: A Probit Approach," Working Papers, Bank of Canada 98-5, Bank of Canada.
    5. Edward E. Leamer, 2001. "The Life Cycle of US Economic Expansions," NBER Working Papers 8192, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:una:unccee:wp0507. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.