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US Monetary Policy Announcements and the Term Structure of Interest Rate Differentials: Evidence from Hong Kong and Singapore

Author

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  • Giorgio Valente

    (University of Warwick, Hong Kong Institute for Monetary Research)

Abstract

This paper investigates the effect of US monetary policy announcements on the term structure of US interest rate differentials with Hong Kong and Singapore. US monetary policy surprises on domestic and international interest rates are measured by using data from short-term interest rate futures markets in all three countries around the FOMC meetings dates. Our results, based on careful treatment of interest rate endogeneity and time-varying risk premia in the futures markets, document that US monetary policy announcements significantly affect the behavior of the term structure of interest rates in the US and in both Asian countries. The implications of these results in light of the expectations hypothesis of the term structure of interest rates (EHTS) are also discussed.

Suggested Citation

  • Giorgio Valente, 2005. "US Monetary Policy Announcements and the Term Structure of Interest Rate Differentials: Evidence from Hong Kong and Singapore," Working Papers 092005, Hong Kong Institute for Monetary Research.
  • Handle: RePEc:hkm:wpaper:092005
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    References listed on IDEAS

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    Cited by:

    1. Valente, Giorgio, 2009. "International interest rates and US monetary policy announcements: Evidence from Hong Kong and Singapore," Journal of International Money and Finance, Elsevier, vol. 28(6), pages 920-940, October.

    More about this item

    Keywords

    Monetary policy; interest rate futures; term structure of interest rates;

    JEL classification:

    • 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
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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