The impact of monetary policy on expectations along the yield curve
Maximilian Böck and
No 306, Department of Economics Working Paper Series from WU Vienna University of Economics and Business
This article investigates how market participants adjust their expectations of interest rates at different maturities in response to a monetary policy and a central bank information shock for the US economy. The results show that market participants adjust their expectations faster to changes in interest rates compared to new releases of information by the central bank. This finding could imply that central bank information shocks are more opaque whereas a change in interest rates provides a stronger signal to the markets. Moreover, financial market agents respond with an initial underreaction to both shocks, potentially resembling inattention or overconfidence. Last, we find that the adjustment of expectations for yields with higher maturities takes considerably longer than for short-term yields. This finding is especially important for central banks since in the current low-interest rate environment monetary policy actions mainly consist of policies aimed at the long-end of the yield curve.
Keywords: monetary policy; expectation formation; belief bias (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-mac and nep-mon
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://epub.wu.ac.at/7909/ original version (application/pdf)
Working Paper: The impact of monetary policy on expectations along the yield curve (2020)
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:wiw:wus005:7909
Access Statistics for this paper
More papers in Department of Economics Working Paper Series from WU Vienna University of Economics and Business Welthandelsplatz 1, 1020 Vienna, Austria.
Bibliographic data for series maintained by WU Library ().