Abstract
This study evaluates the information containing content of two interest rate spreads and one interest rate for the future of the economy, to offer a partial answer as to the effectiveness of monetary policy. The study attempts to offer an analysis of the capability of the spread between IOER and overnight RRP rates, the spread between the 3-month Commercial Paper and Treasury Bill rates, and the Effective Federal Funds Rate, for predicting five monthly economic indicators. The first half of the thesis explains the theoretical framework of monetary policy implementation both pre and post the financial crisis of 2008 to better understand the Central Bank’s policy instruments. The latter section empirically tests the proposed predictive nature of the three interest rate variables and a derivative of each. The study found that the spread between the 3-month financial instruments is helpful in predicting three of the five economic indicators, while the IOER-RRP spread had little to no predictive capability.
Advisor
Gang, Wang
Department
Business Economics
Recommended Citation
Gould, Kevin H., "An Empirical Analysis of the Predictive Power of Interest Rate Spreads in the Policy Normalization Period" (2018). Senior Independent Study Theses. Paper 8060.
https://openworks.wooster.edu/independentstudy/8060
Disciplines
Econometrics | Economic Theory | Finance | Macroeconomics | Public Economics
Keywords
Monetary economics, Federal Reserve, Noosh, Forecasting
Publication Date
2018
Degree Granted
Bachelor of Arts
Document Type
Senior Independent Study Thesis
© Copyright 2018 Kevin H. Gould