Interest Rate Spread
Exercises

Questions and Exercises

1. Describe in your own words the economic theory that underlies why the interest rate spread is a predictor of recessions.

2. Access the Economagic databases for the 10-year Treasury bond rate and for the Federal funds rate, and compute the interest rate spread for 1968 and for 1973. Did the interest rate spread correctly forecast the 1969 and the 1973 recessions?.

3. Access the Economagic databases for the 10-year Treasury bond rate and for the Federal funds rate, and compute the interest rate spread for the last six months. Based on the interest rate spread you have computed, write a one-paragraph economic forecast for the coming 18 months.

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