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Using changes in auction maturity sectors to help identify the impact of QE on gilt yields

  • Banerjee, Ryan

    ()

    (Bank of England)

  • McLaren, Nick

    ()

    (Bank of England)

Using the information contained in economic news and data releases, financial markets have widely anticipated recent Monetary Policy Committee announcements about the amount of assets the Bank of England intends to purchase as part of its quantitative easing (QE) policy. This makes it increasingly difficult to identify the impact of QE on gilt yields. This article uses three ‘natural experiments’ associated with operational changes to the distribution of gilt purchases — in March 2009, August 2009 and February 2012 — to help overcome this identification problem. It finds that the ‘local supply’ channel, which can be identified using these events, can explain around half of the total impact of QE on gilt yields. The estimates of this effect are broadly similar across the three events; so the strength of this channel of QE does not appear to have changed significantly since gilt purchases were introduced in early 2009.

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Article provided by Bank of England in its journal Bank of England Quarterly Bulletin.

Volume (Year): 52 (2012)
Issue (Month): 2 ()
Pages: 129-137

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Handle: RePEc:boe:qbullt:0076
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  1. Jean-Luc Vila & Dimitri Vayanos, 2009. "A Preferred-Habitat Model of the Term Structure of Interest Rates," FMG Discussion Papers dp641, Financial Markets Group.
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