Low Interest Rates and the Predictive Content of the Yield Curve

Michael Bordo and Joseph G. Haubrich

No 20-24R, Working Papers from Federal Reserve Bank of Cleveland

Abstract: Does the yield curve's ability to predict future output and recessions differ when interest rates and inflation are low, as in the current global environment? We explore the issue using historical data going back to the 19th century for the US. This paper is similar in spirit to Ramey and Zubairy (2018), who look at the government spending multiplier in times of low interest rates. If anything, the yield curve tends to predict output growth better in low interest rate environments, though this result is stronger for RGDP than for IP.

Keywords: low interest rates; policy; predictive content of the yield curve (search for similar items in EconPapers)
JEL-codes: E32 G01 N10 (search for similar items in EconPapers)
Pages: 32
Date: 2020-08-06, Revised 2021-12-21
New Economics Papers: this item is included in nep-his and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwq:88522

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DOI: 10.26509/frbc-wp-202024r

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