The response of interest rates to U.S. and U.K. quantitative easing

Jens Christensen and Glenn Rudebusch

No 2012-06, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: We analyze the declines in government bond yields that followed the announcements of plans by the Federal Reserve and the Bank of England to buy longer-term government debt. Using empirical dynamic term structure models, we decompose these declines into changes in expectations about future monetary policy and changes in term premiums. We find that declines in U.S. Treasury yields mainly reflected lower policy expectations, while declines in U.K. yields appeared to reflect reduced term premiums. Thus, the relative importance of the signaling and portfolio balance channels of quantitative easing may depend on market institutional structures and central bank communications policies.

Keywords: Monetary; policy (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-mac and nep-mon
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Journal Article: The Response of Interest Rates to US and UK Quantitative Easing (2012)
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