The Hunt for Duration: Not Waving but Drowning?
Dietrich Domanski (),
Hyun Song Shin and
Vladyslav Sushko ()
Additional contact information
Dietrich Domanski: Bank for International Settlements
IMF Economic Review, 2017, vol. 65, issue 1, 113-153
Abstract Long-term interest rates in Europe fell sharply in 2014 to historically low levels. This development is often attributed to yield-chasing in anticipation of quantitative easing by the European Central Bank. We examine how portfolio adjustments by long-term investors aimed at containing duration mismatches may have acted as an amplification mechanism in this process. Declining long-term interest rates tend to widen the negative duration gap between the assets and liabilities of insurers and pension funds, and any attempted rebalancing by increasing asset duration results in further downward pressure on interest rates. Evidence from the German insurance sector is consistent with such an amplification mechanism.
Keywords: E43; G11; G12; G22 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1057/s41308-016-0026-9 Abstract (text/html)
Access to full text is restricted to subscribers.
Working Paper: The hunt for duration: not waving but drowning? (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pal:imfecr:v:65:y:2017:i:1:d:10.1057_s41308-016-0026-9
Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/41308/PS2
Access Statistics for this article
More articles in IMF Economic Review from Palgrave Macmillan, International Monetary Fund
Bibliographic data for series maintained by Sonal Shukla ().