Zero lower bound, unconventional monetary policy and indicator properties of interest rate spreads

Jari Hännikäinen
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Jari Hännikäinen: School of Management, University of Tampere

No 1495, Working Papers from Tampere University, Faculty of Management and Business, Economics

Abstract: This paper re-examines the out-of-sample predictive power of interest rate spreads when the short-term nominal rates have been stuck at the zero lower bound and the Fed has used unconventional monetary policy. Our results suggest that the predictive power of some interest rate spreads have changed since the beginning of this period. In particular, the term spread has been a useful leading indicator since December 2008, but not before that. Credit spreads generally perform poorly in the zero lower bound and unconventional monetary policy period. However, the mortgage spread has been a robust predictor of economic activity over the 2003–2014 period.

Keywords: business fluctuations; forecasting; interest rate spreads; monetary policy; zero lower bound; real-time data (search for similar items in EconPapers)
JEL-codes: C53 E32 E44 E52 E58 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2014-06
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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http://urn.fi/URN:ISBN:978-951-44-9525-0 First version, 2014 (application/pdf)

Related works:
Journal Article: Zero lower bound, unconventional monetary policy and indicator properties of interest rate spreads (2015)
Working Paper: Zero lower bound, unconventional monetary policy and indicator properties of interest rate spreads (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:tam:wpaper:1495

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