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The Predictive Power Of The Term Structure Under Unconventional Monetary Policies, Luying Yang
The Predictive Power Of The Term Structure Under Unconventional Monetary Policies, Luying Yang
Honors Theses
Previous research has confirmed a positive relationship between the slope of the yield spread and future economic growth. Since the start of the Great Recession, a number of developed economies have hit the zero lower bound and adopted unconventional monetary policies such as large-scale bond/asset purchase programs and negative interest rate policies. This paper finds that the yield spread’s predictive power generally deteriorates after the central bank adopts its first bond purchase program. However, there is no general pattern of how these unconventional monetary policies impact the yield spread’s forecasting ability across countries.