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Across the borders, above the bounds: a non-linear framework for international yield curves

Author

Listed:
  • Coroneo, Laura

    (University of York)

  • Kaminska, Iryna

    (Bank of England)

  • Pastorello, Sergio

    (University of Bologna)

Abstract

This paper presents a non-linear framework to evaluate spillovers across domestic and international yield curves when policy rates are constrained by the zero lower bound. Based on the sample of US and UK data, we estimate a joint shadow rate model of international yield curves, accounting for the zero lower bound, no-arbitrage conditions within and between government bond markets, and the global nature of some of the bond risk factors. Results indicate that the post-2009 US monetary policy transmission mechanism and its spillover effects on the UK yield curve are non-linear and asymmetric.

Suggested Citation

  • Coroneo, Laura & Kaminska, Iryna & Pastorello, Sergio, 2024. "Across the borders, above the bounds: a non-linear framework for international yield curves," Bank of England working papers 1062, Bank of England.
    • Handle: RePEc:boe:boeewp:1062
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    File URL: https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2024/across-the-borders-above-the-bounds-a-non-linear-framework-for-international-yield-curves.pdf
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    More about this item

    Keywords

    Joint term structure models; local projections; monetary policy; non-linear responses; shadow rate term structure models; yield curve; zero lower bound;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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