The interest rate effects of government bond purchases away from the lower bound

Rafael B. De Rezende ()

Journal of International Money and Finance, 2017, vol. 74, issue C, 165-186

Abstract: I analyze the recent experience of unconventional monetary policy in Sweden to study the interest rate transmission mechanisms of government bond purchases when interest rates are away from the lower bound. Using dynamic term structure models and event study regressions I find that government bond purchases have important portfolio balance and signaling effects. The signaling channel operates mainly by lowering short-rate expectations in the intermediate segment of the yield curve, while the portfolio balance channel is effective in lowering longer maturity term premia. In addition, I find that target interest rate policy and government bond purchases operate in different segments of the yield curve. This suggests that a combination of the two policies can be used to lower interest rates across the whole maturity spectrum, making monetary policy more expansionary.

Keywords: Quantitative easing; Signaling channel; Portfolio balance channel; Dynamic affine term structure model; Short-rate expectations; Term premium (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261560617300554
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The interest rate effects of government bond purchases away from the lower bound (2016)
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:eee:jimfin:v:74:y:2017:i:c:p:165-186

DOI: 10.1016/j.jimonfin.2017.03.005

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().