Quantitative easing effects on commercial bank liability and government yields in UK: A threshold cointegration approach

During the recent financial crisis, the Bank of England has taken quantitative easing (QE) measures by buying public as well as private assets in order to strengthen the economy via liquidity injections. This paper investigates the dynamic relationship between unconventional policy measures reflecte...

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Bibliographic Details
Published inInternational economics and economic policy Vol. 15; no. 2; pp. 353 - 371
Main Authors Papadamou, Stephanos, Spyromitros, Eleftherios, Kyriazis, Nikolaos A.
Format Journal Article
LanguageEnglish
Published Berlin/Heidelberg Springer Berlin Heidelberg 01.04.2018
Springer
Springer Nature B.V
Subjects
Asset acquisitions
Banking
Central banks
Cointegration analysis
Commercial banks
Economic crisis
Economic models
Economic Policy
Economics
Economics and Finance
International Economics
Liability
Liquidity (Finance)
Macroeconomics/Monetary Economics//Financial Economics
Monetary policy
Original Paper
Public Finance
Quantitative analysis
United Kingdom
United Kingdom > UK
E5
Bank liabilities yields
G1
Quantitative easing
Non-linear cointegration
E4
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Summary:During the recent financial crisis, the Bank of England has taken quantitative easing (QE) measures by buying public as well as private assets in order to strengthen the economy via liquidity injections. This paper investigates the dynamic relationship between unconventional policy measures reflected in central bank’s assets, and government versus commercial bank liability curves in a non-linear framework. By adopting a threshold cointegration methodology we provide evidence against linearity in gilt and commercial banks’ yield responses to asset purchase facility (APF) activity with policy rate being near the zero lower bound (ZLB). By estimating a momentum-TART model, evidence for a uni-directional long run causality from the Bank of England’s assets to both curves are present.
ISSN:1612-4804
1612-4812
DOI:10.1007/s10368-017-0401-7