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The Yield Curve, Recession and the Credibility of the Monetary Regime: long run evidence 1875-1997

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  • Michael Bordo
  • Joseph Haubrich

Abstract

Most work showing the yield curve predicts future economic growth relies on post WWII data. We demonstrate that the yield curve has predictive content for most of the post Civil War period. This predictive ability, however, is closely related to the credibility of the monetary regime in place, something we measure by the persistence of inflation

Suggested Citation

  • Michael Bordo & Joseph Haubrich, 2004. "The Yield Curve, Recession and the Credibility of the Monetary Regime: long run evidence 1875-1997," Econometric Society 2004 North American Summer Meetings 165, Econometric Society.
  • Handle: RePEc:ecm:nasm04:165
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Leo Krippner, 2008. "A Macroeconomic Foundation for the Nelson and Siegel Class of Yield Curve Models," Research Paper Series 226, Quantitative Finance Research Centre, University of Technology, Sydney.
    2. Dalu Zhang & Peter Moffatt, 2012. "The yield curve as a leading indicator in economic forecasting in the U.K," University of East Anglia Applied and Financial Economics Working Paper Series 035, School of Economics, University of East Anglia, Norwich, UK..
    3. Michael Bordo & Andrew Filardo, 2005. "Deflation and monetary policy in a historical perspective: remembering the past or being condemned to repeat it?," Economic Policy, CEPR;CES;MSH, vol. 20(44), pages 799-844, October.
    4. Huseyin Kaya, 2013. "On the Predictive Power of Yield Spread for Future Growth and Recession: The Turkish Case," Working Papers 010, Bahcesehir University, Betam, revised Mar 2013.
    5. Seok-Kyun Hur, 2005. "Money Growth and Interest Rates," NBER Working Papers 11102, National Bureau of Economic Research, Inc.
    6. Roberto Santis, 2015. "Quantity theory is alive: the role of international portfolio shifts," Empirical Economics, Springer, vol. 49(4), pages 1401-1430, December.
    7. Kuosmanen, Petri & Vataja, Juuso, 2014. "Forecasting GDP growth with financial market data in Finland: Revisiting stylized facts in a small open economy during the financial crisis," Review of Financial Economics, Elsevier, vol. 23(2), pages 90-97.
    8. Olivier Darné & Amélie Charles, 2011. "Large shocks in U.S. macroeconomic time series: 1860-1988," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 5(1), pages 79-100, January.
    9. Joseph G. Haubrich & George Pennacchi & Peter H. Ritchken, 2008. "Estimating real and nominal term structures using Treasury yields, inflation, inflation forecasts, and inflation swap rates," Working Paper 0810, Federal Reserve Bank of Cleveland.
    10. Anna Florio, 2016. "The central bank as shaper and observer of events: The case of the yield spread," Canadian Journal of Economics, Canadian Economics Association, vol. 49(1), pages 320-346, February.
    11. Kuosmanen, Petri & Nabulsi, Nasib & Vataja, Juuso, 2015. "Financial variables and economic activity in the Nordic countries," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 368-379.
    12. David C. Wheelock & Mark E. Wohar, 2009. "Can the term spread predict output growth and recessions? a survey of the literature," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 419-440.
    13. Kang Kyu Ho & Kim Chang-Jin & Morley James, 2009. "Changes in U.S. Inflation Persistence," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 13(4), pages 1-23, September.
    14. De Santis, Roberto A., 2012. "Quantity theory is alive: the role of international portfolio shifts," Working Paper Series 1435, European Central Bank.
    15. Benati, Luca & Goodhart, Charles, 2008. "Investigating time-variation in the marginal predictive power of the yield spread," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1236-1272, April.
    16. repec:kap:ecopln:v:50:y:2017:i:3:d:10.1007_s10644-017-9212-7 is not listed on IDEAS

    More about this item

    Keywords

    Yield Curve; Monetary Regime; credibility;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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