Low interest rates and the predictive content of the yield curve

Michael D. Bordo and Joseph G. Haubrich

The North American Journal of Economics and Finance, 2024, vol. 71, issue C

Abstract: Does the yield curve’s ability to predict future output and recessions differ when interest rates and inflation are low, as was recently the case? 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; The predictive content of the yield curve (search for similar items in EconPapers)
JEL-codes: E32 G01 N10 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:71:y:2024:i:c:s1062940824000056

DOI: 10.1016/j.najef.2024.102081

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