Unconventional Monetary Policy, (A)Synchronicity and the Yield Curve

This paper examines international spillovers from unconventional monetary policy between the United States, the euro area, the United Kingdom and Japan, and assesses the influence of asynchronous policy normalization on the slope of the yield curve. Using high frequency futures data to identify mone...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Author Karlye Dilts Stedman
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 19.11.2019
Subjects
Interest rates
Monetary policy
Yield curve
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Summary:This paper examines international spillovers from unconventional monetary policy between the United States, the euro area, the United Kingdom and Japan, and assesses the influence of asynchronous policy normalization on the slope of the yield curve. Using high frequency futures data to identify monetary policy surprises and controlling for contemporaneous news, I find that spillovers increase during periods of unconventional monetary policy and strengthen during asynchronous policy normalization. Local projections suggest persistent spillovers from the Federal Reserve, whereas other spillovers fade quickly. Through the lens of a shadow rate term structure model, I find that such spillovers elicit revisions, domestically and internationally, to both the expected path of short-term interest rates and required risk compensation, with the latter gaining importance at the effective lower bound of interest rates.
DOI:10.18651/RWP2019-09