Quotation Böck, Maximilian, Feldkircher, Martin. 2021. The Impact of Monetary Policy on Yield Curve Expectations. Journal of Economic Behavior and Organization. 191 887-901.




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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Publication's profile

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


Böck, Maximilian (Former researcher)
Feldkircher, Martin (Diplomatic Academy of Vienna, Austria)
Department of Economics (Crespo Cuaresma) (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5323 Econometrics (Details)
5371 Macroeconomics (Details)
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