The response of interest rates to U.S. and U.K. quantitative easing
AbstractWe analyze the declines in government bond yields that followed the announcements of plans by the Federal Reserve and the Bank of England to buy longer-term government debt. Using empirical dynamic term structure models, we decompose these declines into changes in expectations about future monetary policy and changes in term premiums. We find that declines in U.S. Treasury yields mainly reflected lower policy expectations, while declines in U.K. yields appeared to reflect reduced term premiums. Thus, the relative importance of the signaling and portfolio balance channels of quantitative easing may depend on market institutional structures and central bank communications policies.
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Bibliographic InfoPaper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2012-06.
Date of creation: 2012
Date of revision:
Other versions of this item:
- Jens H. E. Christensen & Glenn D. Rudebusch, 2012. "The Response of Interest Rates to US and UK Quantitative Easing," Economic Journal, Royal Economic Society, vol. 122(564), pages F385-F414, November.
- NEP-ALL-2012-06-13 (All new papers)
- NEP-MAC-2012-06-13 (Macroeconomics)
- NEP-MON-2012-06-13 (Monetary Economics)
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