Monetary policy statements, Treasury yields, and private yields: before and after the zero lower bound
Monetary policy actions since 2008 have influenced long-term interest rates through forward guidance and quantitative easing - both "unconventional" strategies. We examine whether the effect of such actions on Treasury yields have passed through to private yields to a degree comparable to experience before 2008. In order to perform this examination, we propose a strategy to identify the comovement between Treasury yields and private yields induced by monetary policy when an observable representing policy changes, such as changes in the interbank rate, is not available, or when other systematic factors may be important. Our strategy implies that least squares regressions, even within an event window, can be misleading, and our empirical results find evidence for such misleading effects. Implementation of our instrumental variables strategy suggests that the movements in Treasury yields induced by monetary policy statements have passed through to private yields, but to a smaller degree than typical prior to the end of 2008. This may suggest that the effectiveness of unconventional policy actions in stimulating activity are attenuated relative to conventional policy actions.
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- Jean Boivin & Michael T. Kiley & Frederic S. Mishkin, 2010.
"How Has the Monetary Transmission Mechanism Evolved Over Time?,"
NBER Working Papers
15879, National Bureau of Economic Research, Inc.
- Boivin, Jean & Kiley, Michael T. & Mishkin, Frederic S., 2010. "How Has the Monetary Transmission Mechanism Evolved Over Time?," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 8, pages 369-422 Elsevier.
- Jean Boivin & Michael T. Kiley & Frederic S. Mishkin, 2010. "How has the monetary transmission mechanism evolved over time?," Finance and Economics Discussion Series 2010-26, Board of Governors of the Federal Reserve System (U.S.).
- Han Chen & Vasco Cúrdia & Andrea Ferrero, 2011.
"The macroeconomic effects of large-scale asset purchase programs,"
527, Federal Reserve Bank of New York.
- Han Chen & Vasco Cúrdia & Andrea Ferrero, 2012. "The Macroeconomic Effects of Large‐scale Asset Purchase Programmes," Economic Journal, Royal Economic Society, vol. 122(564), pages F289-F315, November.
- Han Chen & Vasco Cúrdia & Andrea Ferrero, 2012. "The macroeconomic effects of large-scale asset purchase programs," Working Paper Series 2012-22, Federal Reserve Bank of San Francisco.
- Vasco Curdia & Andrea Ferrero & Han Chen, 2012. "The Macroeconomic Effects of Large-Scale Asset Purchase Programs," 2012 Meeting Papers 372, Society for Economic Dynamics.
- Michael T. Kiley, 2012. "The aggregate demand effects of short- and long-term interest rates," Finance and Economics Discussion Series 2012-54, Board of Governors of the Federal Reserve System (U.S.).
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