US-euro area term structure spillovers, implications for central banks

Ken Nyholm

No 1980, Working Paper Series from European Central Bank

Abstract: Spillovers between the US and euro area term structures of interest rates are examined. Implications for monetary policy are investigated using term-structure metrics that proxy conventional and unconventional instruments, i.e. the short rate, the 10 year term premium, and the 10 year risk-free rate. A new discrete-time arbitrage-free term structure model is used to extract these variables, at a daily frequency during the period covering 2005 to 2016. Relying on forecast error variance decompositions, following Diebold and Yilmaz (2009), it is found that transatlantic spillovers have increased by approximately 11%-points during the examined period, making it more dicult for central banks to directly assess the impact of their policies. JEL Classification: C32, E43, E58

Keywords: international spillovers; monetary policy; yield curve modelling (search for similar items in EconPapers)
Date: 2016-11
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
Note: 120728
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Citations: View citations in EconPapers (3)

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