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

Jari Hännikäinen

Review of Financial Economics, 2015, vol. 26, issue C, 47-54

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: 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)
Date: 2015
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Zero lower bound, unconventional monetary policy and indicator properties of interest rate spreads (2014)
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:eee:revfin:v:26:y:2015:i:c:p:47-54

DOI: 10.1016/j.rfe.2015.03.002

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