Does the Cost of Private Debt Respond to Monetary Policy? Heteroskedasticity-Based Identification in a Model with Regimes

Massimo Guidolin and Manuela Pedio ()

No 19118, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: We investigate the effects of a conventional monetary expansion, the quantitative easing, and maturity extension programs on the yields of corporate bonds. We adopt a multiple-regime VAR identification based on heteroskedasticity. An impulse response function analysis shows that a traditional, rate based expansionary policy leads to an increase in yields. The response to quantitative easing is instead a general and persistent decrease, in particular for long-term bonds. The responses generated by the maturity extension program are significant and of larger magnitude. A decomposition shows that the unconventional programs reduce the cost private debt primarily through a reduction in risk premia.

Keywords: unconventional monetary policy; transmission channels; heteroskedasticity; vector autoregressions; identification; corporate bond yields. (search for similar items in EconPapers)
JEL-codes: C32 G12 G14 (search for similar items in EconPapers)
Pages: 45
Date: 2019
New Economics Papers: this item is included in nep-cba, nep-mon and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repec.unibocconi.it/baffic/baf/papers/cbafwp19118.pdf (application/pdf)

Related works:
Journal Article: Does the cost of private debt respond to monetary policy? Heteroskedasticity-based identification in a model with regimes (2021)
Working Paper: Does the Cost of Private Debt Respond to Monetary Policy? Heteroskedasticity-Based Identification in a Model with Regimes (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:baf:cbafwp:cbafwp19118

Access Statistics for this paper

More papers in BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy Via Röntgen, 1 - 20136 Milano - Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Michela Pozzi ().