Transmission of Quantitative Easing: The Role of Central Bank Reserves

Christensen, Jens H. E.; Krogstrup, Signe

doi:10.24148/wp2014-18

Cited by 18 publications

(8 citation statements)

References 27 publications

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“…In contrast, the curvature factor has notably less persistent a 33 coefficient estimate. As for the off-diagonal parameters in the mean-reversion A matrix, it is mainly the parameters affecting the mean-reversion of the curvature factor (i.e., the coefficients a 31 and a 32 ) that are significant, which is consistent with the findings of Christensen and Krogstrup (2019), although they only consider Swiss Confederation bond yields with maturities up to ten years. Figure 5 shows the three estimated state variables from all five model estimations.…”

Section: Estimation Resultssupporting

confidence: 79%

Extrapolating Long-Maturity Bond Yields for Financial Risk Measurement

Christensen¹,

López²,

Mussche³

2019

ERWP

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Insurance companies and pension funds have liabilities far into the future and typically well beyond the longest maturity bonds trading in fixed-income markets. Such longlived liabilities still need to be discounted, and yield curve extrapolations based on the information in observed yields can be used. We use dynamic Nelson-Siegel (DNS) yield curve models for extrapolating risk-free yield curves for Switzerland, Canada, France, and the U.S. We find slight biases in extrapolated long bond yields of a few basis points. In addition, the DNS model allows the generation of useful financial risk metrics, such as ranges of possible yield outcomes over projection horizons commonly used for stress-testing purposes. Therefore, we recommend using DNS models as a simple tool for generating extrapolated yields for long-term interest rate risk management.JEL Classification: E43, E47, G12, G22, G28

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Section: Estimation Resultssupporting

confidence: 79%

Extrapolating Long-Maturity Bond Yields for Financial Risk Measurement

Christensen¹,

López²,

Mussche³

2019

ERWP

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“…A fourth channel is market liquidity (See Christensen andGuillan 2017 andChristensen 2016), which alludes to the idea of QE improving the market's ability to trade or to allow for the buying and selling of assets while maintaining stable prices. Finally, the money channel refers to the increase in the quantity of money in the system that takes place after the central bank buys assets from the non-bank private sector.…”

Section: The Transmission Mechanism Of Qe To the Real Economymentioning

confidence: 99%

An Unintended Consequence of Uncoordinated International Monetary Policy on Central America

Hernández¹

2023

International Journal of Political Economy

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This research examines the change in the pattern of foreign indebtedness of countries in Central America in the 2010s and its relation to the second phase of global liquidity generated with the implementation of rounds of quantitative easing (QE) policies by developed countries after the 2008 economic crisis, as well as its implications. Drawing on an analysis of the Central American countries' sectoral balances, their historic dependence on bank lending, and on their contemporary sources of funding, we find that the international bond market has become an important source of debt for these economies in the last decade but that, in contrast to the case of some big emerging economies around the world, the role of non-financial corporations' foreign bond issuance is not so relevant in the case of Central America. By classifying these countries' international debt securities by residence and nationality of issuer, we also identify another difference with big emerging economies and conclude that the financial fragility of some of these countries has been exacerbated more by the general government's foreign bonds issuance than by the financial and non-financial corporations' ones.

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“…They also find that non‐standard measures are not particularly effective in stabilizing macroeconomic conditions after normal business‐cycle supply and demand shocks (i.e., real shocks). Harrison (2017) analyses the effectiveness of quantitative‐easing strategies in a small New Keynesian model calibrated to match the behaviour of the US economy. Similarly, Carlstrom et al (2017) find non‐standard measures useful for counteracting financial shocks in a New Keynesian model enriched with a banking sector and financial market segmentation.…”

Section: Introductionmentioning

confidence: 99%

Non‐standard monetary policy measures in non‐normal times

Bartocci

Notarpietro

Pisani

2022

International Finance

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We evaluate the macroeconomic effects of long-term sovereign-bond purchases by the central bank in an economy that is likely to be characterized by a low equilibrium real interest rate and a non-negligible probability of hitting the zero lower bound (ZLB) on the monetary-policy rate. Our analysis is based on simulations of a dynamic general equilibrium model for the euro area. The main results are the following. First, long-term sovereign-bond purchases reacting to a positive inflation gap help stabilize macroeconomic conditions when the monetary-policy rate hits the ZLB. Second, these purchases are an effective stabilization tool following positive shocks to the sovereign term premium and negative shocks to aggregate demand.

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Transmission of Quantitative Easing: The Role of Central Bank Reserves

Cited by 18 publications

References 27 publications

Extrapolating Long-Maturity Bond Yields for Financial Risk Measurement

Extrapolating Long-Maturity Bond Yields for Financial Risk Measurement

An Unintended Consequence of Uncoordinated International Monetary Policy on Central America

Non‐standard monetary policy measures in non‐normal times

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