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The Effect of the U.S. Quantitative Easing on the Term Structure. A Spatial Panel Model Approach

Author

Listed:
  • Alejandro Almedia

    (Department of Quantitative Methods for Economics and Business, International University of La Rioja, Logrono, Spain)

  • Antonio A. Golpe

    (Department of Economics and Centro de Estudios Avanzados en Fisica, Matematicas y Computacion, University of Huelva, Huelva, Spain)

  • Juan Manuel Martin

    (Department of Quantitative Methods for Economics and Business, International University of La Rioja, Logrono, Spain)

  • José Carlos Vides

    (Department of Applied and Structural Economics and History and ICEI, Complutense University of Madrid, Madrid, Spain)

Abstract

In this paper, we apply the spatial panel model that accounts for serial dynamics, cross-sectional dependence, and common factors to assess interest rate sensitivity across the term structure to changes in the policy rate. Considering the Quantitative Easing (QE) program as a breakpoint, we apply this method before and after implementing this program. First, results suggest the existence of spillovers between different maturities. Second, after QE implementation, the impact of monetary policy is influencing more time the interest rates, that is, it will be more persistent, and the influence of Federal Funds rate on Treasury Constant rates has changed, although remaining the same pattern where short-term maturities are more sensitive than long-term ones. Finally, our findings may suggest that the Fed would possess more controllability of the term structure and a more efficient transmission mechanism. These results possess important considerations to policymakers and the effectiveness of the monetary policy applied by the Fed.

Suggested Citation

  • Alejandro Almedia & Antonio A. Golpe & Juan Manuel Martin & José Carlos Vides, 2023. "The Effect of the U.S. Quantitative Easing on the Term Structure. A Spatial Panel Model Approach," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 73(1), pages 2-23, January.
    • Handle: RePEc:fau:fauart:v:73:y:2023:i:1:p:2-23
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    File URL: https://journal.fsv.cuni.cz/mag/article/show/id/1511
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    More about this item

    Keywords

    monetary policy; spatial panel model; yield curve;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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