Go to the web site of the Federal Reserve Bank of St. Louis (FRED) (fred.stlouisfed.org) and download and graph the data series for the interest rate on Baa-rated corporate bonds (DBAA) from January 1986 until the most recent data available. Go to the web site of the National Bureau of Economic Research (nber.org) and find the dates for business cycle peaks and troughs. (The period between a business cycle peak and trough is a recession.)
a. Describe how the interest rate on these bonds typically moves just before, during, and just after a recession.
b. How does the pattern for the 2007–2009 recession compare to the patterns for other recessions?
c. If you had to date the financial crisis just on the basis of movements in the interest rates on these bonds, in which month would you say the financial crisis began, and in which month would you say the financial crisis ended? Briefly explain your choices.