Quotation Böck, Maximilian, Feldkircher, Martin. 2020. The impact of monetary policy on expectations along the yield curve.


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Abstract

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.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title The impact of monetary policy on expectations along the yield curve
Year 2020
URL https://epub.wu.ac.at/7909/
JEL C32, D83, D84, E52, E70, G40

Associations

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