The Yield Curve, Recessions and the Credibility of the Monetary Regime: Long Run Evidence 1875-1997

36 Pages Posted: 3 May 2004 Last revised: 4 Jul 2010

See all articles by Michael D. Bordo

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics; National Bureau of Economic Research (NBER)

Joseph G. Haubrich

Federal Reserve Bank of Cleveland

Multiple version iconThere are 2 versions of this paper

Date Written: April 2004

Abstract

This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875-1997. This predictability varies over time, however, particularly across different monetary regimes. In accord with our proposed theory, regimes with low credibility (high persistence of inflation) tend to have better predictability.

Suggested Citation

Bordo, Michael D. and Haubrich, Joseph G., The Yield Curve, Recessions and the Credibility of the Monetary Regime: Long Run Evidence 1875-1997 (April 2004). NBER Working Paper No. w10431. Available at SSRN: https://ssrn.com/abstract=533562

Michael D. Bordo (Contact Author)

Rutgers University, New Brunswick - Department of Economics ( email )

New Brunswick, NJ
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joseph G. Haubrich

Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States
216-579-2802 (Phone)
216-579-3050 (Fax)

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