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High probability of global recession in next 5 years, even high in next 10 years: Chief economist of Bank of England

How low can you go? - speech (​Given at the Portadown Chamber of Commerce, Northern Ireland) by Andrew Haldane, Chief Economist and the Executive Director of Monetary Analysis and Statistics at the Bank of England

A metric on the probability of the ZLB binding is to look at the likelihood of recession.  Table 2 looks at cumulative recession probabilities over three time horizons (1, 5 and 10 years ahead) measured over three historical samples (the UK since 1700 and 1945 and a cross-country panel since 1870).  Recessions occur roughly every 3 to 10 years.  Over the course of a decade, they are overwhelmingly more likely than not.
 
So given these recession probabilities, how likely is it that interest rates will be at levels that would allow them to be cut sufficiently to cushion the effects of a typical recession?  We can calculate the probability of interest rates having reached, say, 3% by using the market yield curve.  These market-based probabilities are shown in the final column of Table 2, at different horizons.



Ref:
How low can you go? - speech by Andrew Haldane
http://www.bankofengland.co.uk/publications/Pages/speeches/2015/840.aspx

Charts taken from pdf on the same webpage:
http://www.bankofengland.co.uk/publications/Documents/speeches/2015/speech840.pdf

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