Publication Date



Masami Imai


Economics (ECON)


English (United States)


Chapter 1 revisits the statistical relationship between the yield spread and the future economic growth rate in OECD countries. I confirm that the yield spread is a strong predictor of future economic growth in many countries, but show there is enormous heterogeneity in its predictive ability across countries. I observe that periods of generally declining volatility are associated with diminished forecasting capability. Chapter 2 analyzes how sovereign yield spreads of EMU member countries responded to different crisis resolution policies in the context of the 2007-2008 financial crisis. My analysis suggests that accommodating crisis responses policies which invite regulatory forbearance and delay the resolution of underlying banking system problems increase governments' borrowing costs, though markets seem to react more favorably to the same policy actions if they are undertaken by more credible (i.e. less-indebted) governments.



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