Economics Working Paper 20116
Abstract: Does the yield curve's ability to predict future output and recessions dier 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 US and more recent data for the UK, 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.