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Monetary policy statements, treasury yields, and private yields: Before and after the zero lower bound

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  • Kiley, Michael T.
Abstract
Monetary policy actions since 2008 have influenced long-term interest rates through forward guidance and quantitative easing. We examine whether the effect of such actions on Treasury yields have passed through to private yields to a degree comparable to experience before 2008. We illustrate the possibility of misleading inference from least squares regressions, and our empirical results find evidence for such misleading effects. Implementation of our instrumental variables strategy suggests that the movements in Treasury yields induced by monetary policy statements have passed through to private yields, but to a smaller degree than typical prior to the end of 2008.

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  • Kiley, Michael T., 2016. "Monetary policy statements, treasury yields, and private yields: Before and after the zero lower bound," Finance Research Letters, Elsevier, vol. 18(C), pages 285-290.
    • Handle: RePEc:eee:finlet:v:18:y:2016:i:c:p:285-290
    DOI: 10.1016/j.frl.2016.04.029
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    Cited by:

    1. Janet L. Yellen, 2011. "Improving the international monetary and financial system : a speech at the Banque de France International Symposium, Paris, France, March 4, 2011," Speech 565, Board of Governors of the Federal Reserve System (U.S.).
    2. Thornton, John & Vasilakis, Chrysovalantis, 2017. "Inflation targeting and the cyclicality of monetary policy," Finance Research Letters, Elsevier, vol. 20(C), pages 296-302.
    3. Gabriel Chodorow-Reich, 2014. "Effects of Unconventional Monetary Policy on Financial Institutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(1 (Spring), pages 155-227.
    4. Michael T. Kiley, 2018. "Quantitative Easing and the ‘New Normal’ in Monetary Policy," Manchester School, University of Manchester, vol. 86(S1), pages 21-49, September.
    5. Ben S. Bernanke, 2014. "The Federal Reserve: Looking Back, Looking Forward : a speech at the Annual Meeting of the American Economic Association, Philadelphia, Pennsylvania, January 3, 2014," Speech 792, Board of Governors of the Federal Reserve System (U.S.).
    6. George A. Kahn & Lisa Taylor, 2014. "Evolving market perceptions of Federal Reserve policy objectives," Macro Bulletin, Federal Reserve Bank of Kansas City, pages 1-2, March.
    7. Park, Keun Woo & Hong, Dahae & Oh, Ji Yeol Jimmy, 2019. "Investor behavior around monetary policy announcements: Evidence from the Korean stock market," Finance Research Letters, Elsevier, vol. 28(C), pages 355-362.
    8. Kiley, Michael T., 2016. "Monetary policy statements, treasury yields, and private yields: Before and after the zero lower bound," Finance Research Letters, Elsevier, vol. 18(C), pages 285-290.
    9. Linda S. Goldberg & Christian Grisse, 2013. "Time variation in asset price responses to macro announcements," Staff Reports 626, Federal Reserve Bank of New York.
    10. Goy, Gavin & Hommes, Cars & Mavromatis, Kostas, 2022. "Forward guidance and the role of central bank credibility under heterogeneous beliefs," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 1240-1274.
    11. Österholm, Pär, 2018. "The relation between treasury yields and corporate bond yield spreads in Australia: Evidence from VARs," Finance Research Letters, Elsevier, vol. 24(C), pages 186-192.
    12. Chen, Hsuan-Chi & Yeh, Chia-Wei, 2021. "Global financial crisis and COVID-19: Industrial reactions," Finance Research Letters, Elsevier, vol. 42(C).
    13. Caputo, Rodrigo & Pedersen, Michael, 2020. "The changing nature of the real exchange rate: The role of central bank preferences," Economic Modelling, Elsevier, vol. 90(C), pages 445-464.

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    More about this item

    Keywords

    Monetary policy; Treasury yields; Private yields;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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