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Quantitative easing effects on commercial bank liability and government yields in UK: A threshold cointegration approach

Author

Listed:
  • Stephanos Papadamou

    (University of Thessaly)

  • Eleftherios Spyromitros

    (Democritus University of Thrace)

  • Nikolaos A. Kyriazis

    (University of Thessaly)

Abstract

During the recent financial crisis, the Bank of England has taken quantitative easing (QE) measures by buying public as well as private assets in order to strengthen the economy via liquidity injections. This paper investigates the dynamic relationship between unconventional policy measures reflected in central bank’s assets, and government versus commercial bank liability curves in a non-linear framework. By adopting a threshold cointegration methodology we provide evidence against linearity in gilt and commercial banks’ yield responses to asset purchase facility (APF) activity with policy rate being near the zero lower bound (ZLB). By estimating a momentum-TART model, evidence for a uni-directional long run causality from the Bank of England’s assets to both curves are present.

Suggested Citation

  • Stephanos Papadamou & Eleftherios Spyromitros & Nikolaos A. Kyriazis, 2018. "Quantitative easing effects on commercial bank liability and government yields in UK: A threshold cointegration approach," International Economics and Economic Policy, Springer, vol. 15(2), pages 353-371, April.
    • Handle: RePEc:kap:iecepo:v:15:y:2018:i:2:d:10.1007_s10368-017-0401-7
    DOI: 10.1007/s10368-017-0401-7
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    Cited by:

    1. Stephanos Papadamou & Νikolaos A. Kyriazis & Panayiotis G. Tzeremes, 2020. "US non-linear causal effects on global equity indices in Normal times versus unconventional eras," International Economics and Economic Policy, Springer, vol. 17(2), pages 381-407, May.
    2. Stephanos Papadamou & Nikolaos A. Kyriazis & Panayiotis G. Tzeremes, 2019. "Spillover Effects of US QE and QE Tapering on African and Middle Eastern Stock Indices," JRFM, MDPI, vol. 12(2), pages 1-20, April.
    3. Νikolaos A. Kyriazis, 2021. "Investigating the nexus between European major and sectoral stock indices, gold and oil during the COVID-19 pandemic," SN Business & Economics, Springer, vol. 1(4), pages 1-12, April.

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    More about this item

    Keywords

    Non-linear cointegration; Quantitative easing; Bank liabilities yields;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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