Monetary policy surprises and their transmission through term premia and expected interest rates

Iryna Kaminska, Haroon Mumtaz () and Roman Sustek ()
Additional contact information
Haroon Mumtaz: Queen Mary University of London
Roman Sustek: Queen Mary University of London

No 914, Bank of England working papers from Bank of England

Abstract: Monetary policy moves the yield curve. How much is due to expected interest rates versus term premia? And what are the macroeconomic consequences? Applying an affine term structure model to highfrequency yield curve movements around FOMC announcements, we shed new light on these questions. Estimation is subject to restrictions addressing estimation bias present in previous studies. The model is used to extract three instruments for policy shocks: action, expected path and its uncertainty. The instruments are then used in a local projections macroeconomic model, where the identified shocks provide insights into monetary policy transmission through the lenses of existing theories.

Keywords: High-frequency data; affine term structure models; yield curve decomposition; estimation bias; multidimensional policy shocks; monetary policy transmission mechanism (search for similar items in EconPapers)
JEL-codes: C58 E43 E52 E58 G12 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2021-03-05, Revised 2021-04-28
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Monetary policy surprises and their transmission through term premia and expected interest rates (2021)
Working Paper: Monetary policy surprises and their transmission through term premia and expected interest rates (2020)
Working Paper: Monetary policy surprises and their transmission through term premia and expected interest rates (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0914

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