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Term Structure Modeling with Supply Factors and the Federal Reserve's Large Scale Asset Purchase Programs

Canlin Li and Min Wei

No 2014-7, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper estimates an arbitrage-free term structure model with both observable yield factors and Treasury and Agency MBS supply factors, and uses it to evaluate the term premium effects of the Federal Reserve's large-scale asset purchase programs. Our estimates show that the first and the second large-scale asset purchase programs and the maturity extension program jointly reduced the 10-year Treasury yield by about 100 basis points.

Keywords: No-arbitrage term structure models; Yield curve; Preferred habitat; Supply effects; Factor models; Large-scale asset purchases (LSAP); Agency mortgage-backed securities (MBS) (search for similar items in EconPapers)
Date: 2014-03-24
New Economics Papers: this item is included in nep-mac and nep-mon
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http://www.federalreserve.gov/pubs/feds/2014/201407/201407pap.pdf Full text (application/pdf)

Related works:
Journal Article: Term Structure Modeling with Supply Factors and the Federal Reserve's Large-Scale Asset Purchase Progarms (2013) Downloads
Working Paper: Term structure modelling with supply factors and the Federal Reserve's Large Scale Asset Purchase programs (2012) Downloads
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