Munich Personal RePEc Archive

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

Hännikäinen, Jari (2014): Zero lower bound, unconventional monetary policy and indicator properties of interest rate spreads.

[img]
Preview
PDF
MPRA_paper_56737.pdf

Download (351kB) | Preview

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.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.