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- Title
The Response of Interest Rates to US and UK Quantitative Easing<sup>*</sup>.
- Authors
Christensen, Jens H. E.; Rudebusch, Glenn D.
- Abstract
We analyse declines in government bond yields following announcements by the Federal Reserve and the Bank of England of plans to buy longer term debt. Using dynamic term structure models, we decompose US and UK yields into expectations about future short-term interest rates and term premiums. We find that declines in US yields mainly reflected lower expectations of future short-term interest rates, while declines in UK yields appeared to reflect reduced term premiums. Thus, the relative importance of the signalling and portfolio balance channels of quantitative easing may depend on market institutional structures and central bank communication policies.
- Subjects
CENTRAL banking industry; MONETARY policy; INTEREST rates; BOARD of Governors of the Federal Reserve System (U.S.); BANK of England. Monetary Policy Committee; FEDERAL Reserve banks; BANK of England; FEDERAL funds market (U.S.); FEDERAL Reserve monetary policy
- Publication
Economic Journal, 2012, Vol 122, Issue 564, pF385
- ISSN
0013-0133
- Publication type
Article
- DOI
10.1111/j.1468-0297.2012.02554.x