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Quantitative Easing and Long-Term Yields in Small Open Economies

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  • Antonio Diez de los Rios
  • Maral Shamloo

Abstract

We compare the Federal Reserve’s asset purchase programs with those implemented by the Bank of England and the Swedish Riksbank, and the Swiss National Bank’s reserve expansion program. We decompose government bond yields into (i) an expectations component, (ii) a global term premium and (iii) a country-specific term premium to analyze two-day changes in 10-year yields around announcement dates. We find that, in contrast to the Federal Reserve’s asset purchases, the programs implemented in these smaller economies have not been able to affect the global term premium and, consequently, their effectiveness in lowering long-term yields has been limited.

Suggested Citation

  • Antonio Diez de los Rios & Maral Shamloo, 2017. "Quantitative Easing and Long-Term Yields in Small Open Economies," Staff Working Papers 17-26, Bank of Canada.
  • Handle: RePEc:bca:bocawp:17-26
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    References listed on IDEAS

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    Cited by:

    1. Richhild Moessner, 2018. "Effects of asset purchases and financial stability measures on term premia in the euro area," BIS Working Papers 721, Bank for International Settlements.

    More about this item

    Keywords

    Financial markets; Interest rates; Monetary Policy;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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