Reaction of Swiss Term Premia to Monetary Policy Surprises
AbstractAn affine yield curve model is estimated on daily Swiss data 2002--2009. The market price of risk is modelled in terms of proxies for uncertainty, which are estimated from interest rate options. The estimated model generates innovations in the 3-month rate that are similar to external evidence of monetary policy surprises - as well as term premia that are consistent with survey data. The results indicate that a surprise increase in the policy rate gives a reasonably sized decrease (-0.25%) in term premia for longer maturities.
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Bibliographic InfoPaper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2009 with number 2009-33.
Length: 23 pages
Date of creation: Dec 2009
Date of revision:
affine price of risk; interest rate caps; survey data;
Other versions of this item:
- Paul Söderlind, 2010. "Reaction of Swiss Term Premia to Monetary Policy Surprises," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(I), pages 385-404, March.
- E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-10 (All new papers)
- NEP-CBA-2010-01-10 (Central Banking)
- NEP-MAC-2010-01-10 (Macroeconomics)
- NEP-MON-2010-01-10 (Monetary Economics)
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