International channels of the Fed’s unconventional monetary policy
AbstractPrevious research has established that the Federal Reserve large scale asset purchases (LSAPs) significantly influenced international bond yields. This paper analyzes the channels through which these effects occurred. We use dynamic term structure models to decompose international yield changes into changes in term premia and expected short rates. The conclusions for most countries are model dependent. Models that impose a unit root tend to imply large signaling effects for Australia, Canada, Germany and the United States. Models that do not restrict persistence imply negligible signaling effects for any country. Our preferred bias-corrected model implies large signaling effects for Canada and the United States. The idea that LSAP announcements signal information about Canadian rates is intuitively attractive because conventional US monetary policy shocks strongly predict Canadian rates.
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Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2012-028.
Date of creation: 2012
Date of revision:
Other versions of this item:
- Michael D. Bauer & Christopher J. Neely, 2012. "International channels of the Fed’s unconventional monetary policy," Working Paper Series 2012-12, Federal Reserve Bank of San Francisco.
- NEP-ALL-2012-09-16 (All new papers)
- NEP-MON-2012-09-16 (Monetary Economics)
- NEP-OPM-2012-09-16 (Open Economy Macroeconomic)
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