تغییرات در محتوای اطلاعاتی بازده دوره: آیا سیاست پولی اثربخشی پایینی دارد؟

We examine the predictive power of term spreads as predictors of economic recessions in Europe and the US. Using a battery of methodologies that include endogenous changepoint detection we find that the predictive power of spread-type variables has changed significantly during the 1980s and 1990s: in the most advanced countries the domestic spread has lost its informative content in favor of international – US and German – spreads, whereas in less developed countries this informational content has appeared during the late 1980s. Given the theoretical arguments for the predictive power, these findings suggest that domestic monetary policy may have become less effective in the most developed countries of the sample.

The mild recession that hit some of the advanced economies in 2000–2001 revived the interest for the study of economic cycles and of the management of these cycles. The theoretical literature has contributed significantly to this analysis by incorporating to dynamic general equilibrium models nominal frictions that generate real effects of economic policies (Clarida et al., 1999 and Clarida et al., 2002). In particular, monetary policy is attracting renewed attention: increased pressure is being put on policymakers to anticipate economic fluctuations and smooth them accordingly. Gathering information about current and future economic conditions becomes an important role of the Central Bank (CB) so that decisions can be taken enough in advance to account for lags in policy effectiveness. As a consequence, on the empirical side emphasis is being placed on the detection of variables that forecast the future evolution of the economy (Leamer, 2001; Estrella, Rodrigues, & Schich, 2003). Monetary aggregates, exchange rates or discount rates were traditionally used as predictors of future economic activity. All these direct indicators can be problematic (Davis & Fagan, 1997), so attention turned to indirect predictive variables such as term spreads. Theoretical arguments for the predictive content of spread-type variables rely directly on the real effects of monetary policy and on the ability of the CB to carry out independent monetary policy and affect market interest rates. A substantial amount of research has shown that the informational content of the term spread about future output is high. However, most of this research has focused on the 1980s and early 1990s and on large developed economies such as the US, Germany and the UK. Little research has been done on smaller or less developed economies, and, thus, there is still much to be learned from the analysis of the predictive power of term spreads. In this paper we study the informational content of term spreads in a number of European Union (EU) countries and in the US. We focus on whether this informational content has changed in the last two decades. More specifically, we attempt to answer the following questions: • Do domestic spreads have information about future economic activity in a set of European nations? Has this informational content changed in the last two decades? • If so, how has this content changed and what may be the reasons behind those changes? Our findings are noteworthy. We show, as was already known, that term spreads indeed have had quite high predictive power in the last two decades. However, this informational content has decreased noticeably for domestic spreads in a set of countries during the 1990s, whereas it has increased in some others. The level of monetary and financial development of the country seems to be behind this phenomenon: it is in the more advanced economies where the predictive power of domestic spreads has been lost, usually in favor of international – German or US – spreads. We interpret these findings as stemming from the more intense integration of the economies, which may be both facilitating the transmission of real shocks across countries – thus cycles in the different economies are more correlated – and limiting the scope for independent domestic monetary policies. The paper proceeds as follows. Section 2 gives simple theoretical arguments for the predictive content of term spreads. Section 3 reviews the empirical strategy used to analyze changes in this predictive power in a set of nine European countries and the US. Section 4 presents the results of the analysis and Section 5 concludes the paper. Some technicalities of the estimation procedure are provided in Appendix A.

We have conducted an analysis on the predictive power about real economic activity of term spreads in a set of EU countries and the US. We focused on detecting changes in that predictive power in the last two decades and on trying to offer some heuristic explanations for those changes. We showed that the informational content of domestic term spreads has been significantly high in the past and mentioned that alternative financial variables offer little additional information. Then, we located changes in the structure of the predictive power. We found that during the 1980s it was mostly domestic spreads that could be used for prediction of economic conditions in Europe whereas in the 1990s this power has been lost, and most of the information can be obtained from international spreads (Germany and the US). Also, we found that the predictive power of spreads seems to go through two stages: as the domestic financial and monetary systems develop, the spread becomes informative but a more profound integration leads to a disappearance of the predictive power of the domestic spread, usually in favor of some international spread that, in any case, ends up having weak predictive power. Our results split the countries in our sample into two groups that can be associated with these two stages, depending on the direction of the change of the predictive content detected at the changepoint. The groupings of the countries into “more” and “less” developed are, in fact, quite reasonable and imply that interesting cross-country findings can be uncovered by further research. The results suggest that European economies have become more integrated with the US and among themselves during the 1990s – both in the real and monetary sides – and that this integration may be leading to a monetary policy that is faster in affecting the real economy but overall less effective. A question that arises is the cause of this lower effectiveness: is it that the more intense international integration places constraints on domestic monetary policy or is it that monetary policy – whose effectiveness relies on the existence of nominal frictions – is less effective in developed economies where nominal rigidities are being overcome? The analysis of the determinants of policy effectiveness becomes a priority for research.