Low Interest Rates, Policy, and the Predictive Content of the Yield Curve

Michael Bordo () and Joseph Haubrich ()

No 202024, 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 are low, as in the current global environment? In this paper we build on recent econometric work by Shi, Phillips, and Hurn that detects changes in the causal impact of the yield curve and relate that to the level of interest rates. We explore the issue using historical data going back to the 19th century for the United States and more recent data for the United Kingdom, Germany, and Japan. This paper is similar in spirit to Ramey and Zubairy (2018), who look at the government spending multiplier in times of low interest rates.

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: 33
Date: 2020-08-06
New Economics Papers: this item is included in nep-his and nep-mac
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Working Paper: Low Interest Rates, Policy, and the Predictive Content of the Yield Curve (2020)
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DOI: 10.26509/frbc-wp-202024

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