Teaching | Writing | Career | Politics | Book Reviews | Information Economy | Economists | Multimedia | Students | Fine Print | Other | My Jobs
Recent Yield Spreads
J. Bradford DeLong
from the Economist.
- The rapid rise in yield spreads suggests a shaky economy in which the price of risk is rising rapidly.
- If spreads rise too far and too fast, then it will become difficult for monetary policy to stimulate the economy: what matters for the economy and for aggregate demand is the long-term real risky interest rate--a very different animal from the short-term nominal risk-free interest rate that the Federal Reserve controls.
- The rise in risk premia is good enough reason for the Federal Reserve to lower the interest rates it controls further.
- Nevertheless, as of mid-January, claims that the economy is sliding into recession are still very premature...
Professor of Economics J. Bradford DeLong, 601 Evans Hall, #3880
University of California at Berkeley
Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax
This document: http://www.j-bradford-delong.net/TotW/g16.html