Across the borders, above the bounds: a non-linear framework for international yield curves

Laura Coroneo, Iryna Kaminska and Sergio Pastorello ()
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Sergio Pastorello: University of Bologna

No 1062, Bank of England working papers from Bank of England

Abstract: This paper presents a non-linear framework to evaluate spillovers across domestic and international yield curves when policy rates are constrained by the zero lower bound. Based on the sample of US and UK data, we estimate a joint shadow rate model of international yield curves, accounting for the zero lower bound, no-arbitrage conditions within and between government bond markets, and the global nature of some of the bond risk factors. Results indicate that the post-2009 US monetary policy transmission mechanism and its spillover effects on the UK yield curve are non-linear and asymmetric.

Keywords: Joint term structure models; local projections; monetary policy; non-linear responses; shadow rate term structure models; yield curve; zero lower bound (search for similar items in EconPapers)
JEL-codes: E43 E47 E52 G15 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2024-02-09
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:1062

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