The Impact of Quantitative Easing on the U.S. Term Structure of Interest Rates

2012 ◽  
Author(s):  
Robert A. Jarrow ◽  
Hao Li
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Quantitative Easing ◽  
The Impact ◽  
The U.S

scholarly journals Pre- and Post-GFC Policy Multipliers

2020 ◽  
Vol 20 (237) ◽  
Author(s):  
Sam Ouliaris ◽  
Celine Rochon
Keyword(s):  
Central Bank ◽  
Interest Rates ◽  
Balance Sheet ◽  
Quantitative Easing ◽  
Dynamic Effects ◽  
Real Gdp ◽  
Rate Environment ◽  
The Impact ◽  
Policy Multipliers ◽  
The U.S

This paper estimates the change in policy multipliers in the U.S. relative to their pre-2008 financial crisis levels using an augmented Blanchard-Perotti model to allow for the dynamic effects of shocks to the central bank balance sheet, real interest rates and debt levels on economic activity. Given the elevated debt level and significantly larger central bank balance sheet in the U.S. after 2008, the paper estimates the likely impact of new stimulus packages. We find that expenditure multipliers have fallen post-2008 crisis because of higher government debt, implying that the effectiveness of fiscal policy has declined. The analysis also investigates the impact of quantitative easing. The results suggest that it is beneficial, but requires sizable balance sheet interventions to lead to noticeable effects on real GDP. The results are used to assess the impact of the policy packages to address COVID-19. Because of rising debt stocks, dealing with a crisis is becoming more and more costly despite the current low interest rate environment.

Yield Curves, Swap Curves, and Term Structure of Interest Rates

2019 ◽  
pp. 203-228
Author(s):  
Tom P. Davis ◽  
Dmitri Mossessian
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Yield Curves ◽  
No Arbitrage ◽  
Interest Rate Swap ◽  
The Interest Rate ◽  
Rate Swap ◽  
The U.S

This chapter discusses multiple definitions of the yield curve and provides a conceptual understanding on the construction of yield curves for several markets. It reviews several definitions of the yield curve and examines the basic principles of the arbitrage-free pricing as they apply to yield curve construction. The chapter also reviews cases in which the no-arbitrage assumption is dropped from the yield curve, and then moves to specifics of the arbitrage-free curve construction for bond and swap markets. The concepts of equilibrium and market curves are introduced. The details of construction of both types of the curve are illustrated with examples from the U.S. Treasury market and the U.S. interest rate swap market. The chapter concludes by examining the major changes to the swap curve construction process caused by the financial crisis of 2007–2008 that made a profound impact on the interest rate swap markets.

scholarly journals Forecasting Term Structure of Interest Rates in Japan

2019 ◽  
Vol 7 (3) ◽  
pp. 39 ◽  
Author(s):  
Ishii
Keyword(s):  
Financial Crisis ◽  
Interest Rates ◽  
Term Structure ◽  
Bond Markets ◽  
Forecast Horizon ◽  
Forecast Performance ◽  
Crisis Period ◽  
Long Period ◽  
The U.S ◽  
Dns Model

In this paper, we examined and compared the forecast performances of the dynamic Nelson–Siegel (DNS), dynamic Nelson–Siegel–Svensson (DNSS), and arbitrage-free Nelson–Siegel (AFNS) models after the financial crisis period. The best model for the forecast performance is the DNSS model in the middle and long periods. The AFNS is inferior to the DNS model for long-period forecasting. In U.S. bond markets, AFNS is shown to be superior to DNS in the U.S. However, for Japanese data, there is no evidence that the AFNS is superior to the DNS model in the long forecast horizon.

scholarly journals The Effects of Quantitative Easing Announcements on the Mortgage Market: An Event Study Approach

2019 ◽  
Vol 7 (1) ◽  
pp. 9 ◽  
Author(s):  
Gang Wang
Keyword(s):  
Interest Rates ◽  
Event Study ◽  
The United States ◽  
Mortgage Market ◽  
Quantitative Easing ◽  
Study Approach ◽  
Mortgage Rate ◽  
Mortgage Securities ◽  
The Impact ◽  
T Distribution

This paper uses event study analysis to estimate the impact of the United States Federal Reserve Bank’s (Fed) quantitative easing (QE) announcements on the mortgage market during the zero lower bound (ZLB) period. A total of 35 QE announcements are identified and their effects are evaluated. The best-fitting integrated generalized autoregressive conditional heteroskedasticity (IGARCH) model with skewed t distribution is used to measure the QE announcement effects on daily changes of the 30-year mortgage rate, the 30-year Treasury rate and the spread between them. Announcements suggesting the start of a new round of QE reduced the mortgage rate tremendously, while the effects of further news diminished. Announcements of an increase in mortgage-backed security purchases decreased the mortgage rate more than the Treasury rate and reduced the credit risk of holding mortgage securities over Treasury securities. The delayed effects of QE announcements on the mortgage rate were less than short-run effects but persistent. We also find that the previous literature overestimates QE effects on interest rates in general.

The Effect of Quantitative Easing on Investment in the US and UK: An SVAR Approach

2018 ◽  
Author(s):  
Thomas Russell
Keyword(s):  
Interest Rates ◽  
Quantitative Easing ◽  
Structural Vector Autoregression ◽  
Bond Yields ◽  
Bond Yield ◽  
Downward Pressure ◽  
The Us ◽  
Historical Relationship ◽  
The Uk ◽  
The Impact

Following the collapse of Lehman Brothers in 2008, the Federal Reserve and the Bank of England implemented asset purchase programs to provide further liquidity to faltering markets, and to continue to place downward pressure on market interest rates. Later called Quantitative Easing, the higher asset prices and lower market yields induced by the purchases were expected to translate into lower market borrowing costs and increased investment. This project focused on estimating the effect of Quantitative Easing on real investment in the US and UK up to 2010. First, the historical relationship between bond yields and investment was estimated using a time series econometric model called a structural vector autoregression. Next, using the historical relationship between bond yields and investment, the impact of the asset purchases on investment was calculated using the bond yield changes induced by  Quantitative Easing announcements. Deviations in bond yields on Quantitative Easing announcement dates suggested an impact on investment of 5.93% in the US, and an impact of 3.37% in the UK. Moreover, both the US and UK econometric results are statistically significant. Taking into account the econometric assumptions required to estimate the impact of Quantitative Easing on investment, the results in this project should be viewed with caution. However, the results will be useful in framing future thought on Quantitative Easing as a tool to provide macroeconomic stability 

Information in the U.S. Treasury Term Structure of Interest Rates

2010 ◽  
Author(s):  
Robert E. Brooks ◽  
Brandon N. Cline ◽  
Walter Enders
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
The U.S

scholarly journals Some Lessons from the Yield Curve

1995 ◽  
Vol 9 (3) ◽  
pp. 129-152 ◽  
Author(s):  
John Y Campbell
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Bond Market ◽  
Expectations Hypothesis ◽  
Expectation Hypothesis ◽  
Maturity Structure ◽  
Short And Long Term ◽  
The U.S

This paper reviews the literature on the relation between short- and long-term interest rates. It summarizes the mixed evidence on the expectation hypothesis of the term structure: when long rates are high relative to short rates, short rates tend to rise as implied by the expectations hypothesis, but long rates tend to fall, which is contrary to the expectations hypothesis. The paper discusses the response of the U.S. bond market to shifts in monetary policy in the spring of 1994 and reviews the debate over the optimal maturity structure of the U.S. government debt.

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