Information content in yield curve dynamics: Implications for monetary policy

Youngjin Hwang

Journal of Macroeconomics, 2025, vol. 83, issue C

Abstract: This study explores the information content of yield curve dynamics in the context of monetary policy using time-varying macro VARs augmented with three yield curve factors (i.e., level, slope, and curvature). By utilizing contemporaneous co-movements between short-term interest rates and these factors, we identify multiple shocks related to monetary policy: two news shocks (supply and demand), a forward guidance shock, and an inflation-targeting shock. We find distinct differences in the dynamic responses of output and prices across shocks as well as over time. We highlight the role of each yield curve factor, in particular the curvature factor in a forward guidance shock, in generating the results across shocks.

Keywords: News shocks; Monetary policy; Forward guidance; Yield curve; Level; Slope; Curvature; Time-varying VARs (search for similar items in EconPapers)
JEL-codes: C11 C32 C38 E52 E58 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:83:y:2025:i:c:s0164070424000727

DOI: 10.1016/j.jmacro.2024.103658

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