International channels of the Fed’s unconventional monetary policy

Michael Bauer and Christopher Neely

No 2012-028, Working Papers from Federal Reserve Bank of St. Louis

Abstract: Previous research has established that the Federal Reserve large scale asset purchases (LSAPs) significantly influenced international bond yields. This paper analyzes the channels through which these effects occurred. We use dynamic term structure models to decompose international yield changes into changes in term premia and expected short rates. The conclusions for most countries are model dependent. Models that impose a unit root tend to imply large signaling effects for Australia, Canada, Germany and the United States. Models that do not restrict persistence imply negligible signaling effects for any country. Our preferred bias-corrected model implies large signaling effects for Canada and the United States. The idea that LSAP announcements signal information about Canadian rates is intuitively attractive because conventional US monetary policy shocks strongly predict Canadian rates.

Keywords: Monetary policy; Bonds; International finance (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-mon and nep-opm
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Citations: View citations in EconPapers (30)

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Journal Article: International channels of the Fed's unconventional monetary policy (2014)
Working Paper: International channels of the Fed’s unconventional monetary policy (2012)
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