Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/218817
Authors: 
Stuart, Rebecca
Year of Publication: 
2020
Series/Report no.: 
QUCEH Working Paper Series No. 2020-03
Abstract: 
The ability of the term structure (specifically the term spread, or the difference between the long and short ends of the yield curve) to predict economic activity is empirically well-established for the US, but less so for small open economies. The literature emphasizes the role of monetary policy for this predictive ability. Between 1972-2018, Ireland experienced three monetary regimes: first, the Irish Pound was fixed to Sterling (1972-1979); second the Pound floated in a band when Ireland was a member of the EMS (1979-1998); and third, as a member of the euro area (1999-2018). Using dynamic probit models and monthly data, I show that the term spread only had predictive power during the second regime, the only one in which the Central Bank of Ireland had any discretion to set interest rates based on domestic conditions.
Subjects: 
Ireland
term structure
recessions
monetary regimes
JEL: 
C25
E00
E43
N14
Document Type: 
Working Paper

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