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Revisiting the Ability of Interest Rate Spreads to Predict Recessions: Evidence for a

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Listed:
  • Esther Fernández Galar

    (BBVA , Escuela de Finanzas)

  • Javier Gómez Biscarri

    (School of Economics and Business Administration, University of Navarra)

Abstract

In this paper we examine the power of the interest rate spread and of other financial variables as predictors of economic recessions in Spain. The domestic term spread is found to have little information about future real activity. However, term spreads in big economies to which Spain is related, specifically Germany and the US, are found to have significant predicting power but at different time horizons. Both these findings are in line with the facts that the monetary policy of Spain has not been independent and that it has been conditioned by that of other big economies, most notably Germany.

Suggested Citation

  • Esther Fernández Galar & Javier Gómez Biscarri, 2003. "Revisiting the Ability of Interest Rate Spreads to Predict Recessions: Evidence for a," Faculty Working Papers 04/03, School of Economics and Business Administration, University of Navarra.
    • Handle: RePEc:una:unccee:wp0403
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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