Böck, Maximilian, Feldkircher, Martin. 2021. The Impact of Monetary Policy on Yield Curve Expectations. Journal of Economic Behavior and Organization. 191 887-901.
BibTeX
Abstract
A great deal of monetary policy is aimed at steering market expectations but little is known about agents belief formation. This article investigates how US market participants adjust yield curve expectations in response to two shocks related to monetary policy. The results show that in the aggregate, market participants initially underreact to changes in monetary policy. This implies that news are not fully absorbed, which potentially impedes a smooth monetary policy transmission. We further show that these information rigidities could be driven by a lack of information diffusion among individual forecasters. Last, we find that depending on the source of the shock and the maturities of the yields, underreaction is followed by a period of overcompensation a pattern called delayed overshooting. Knowing this allows the central bank to better calibrate their actions in the first place, which could pave the way for more optimal monetary policy.
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Status of publication | Published |
---|---|
Affiliation | WU |
Type of publication | Journal article |
Journal | Journal of Economic Behavior and Organization |
Citation Index | SSCI |
WU Journalrating 2009 | A |
WU-Journal-Rating new | FIN-A, STRAT-A, VW-B, WH-A |
Language | English |
Title | The Impact of Monetary Policy on Yield Curve Expectations |
Volume | 191 |
Year | 2021 |
Page from | 887 |
Page to | 901 |
Reviewed? | Y |
URL | https://www.sciencedirect.com/science/article/pii/S0167268121004297 |
DOI | https://doi.org/10.1016/j.jebo.2021.09.044 |
Open Access | Y |
Open Access Link | https://www.sciencedirect.com/science/article/pii/S0167268121004297 |
JEL | C32, D83, D84, E52, E70, G40 |
Associations
- People
- Böck, Maximilian (Former researcher)
- External
- Feldkircher, Martin (Diplomatic Academy of Vienna, Austria)
- Organization
- Department of Economics (Crespo Cuaresma) (Details)
- Research areas (ÖSTAT Classification 'Statistik Austria')
- 5323 Econometrics (Details)
- 5371 Macroeconomics (Details)