The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy

The preceding chapters have examined the deepened integration of emerging and developing economies (EDEs) into the international financial system in the new millennium and their changing vulnerabilities to external financial shocks. They have discussed the role that policies in advanced economies played in this process, including those that culminated in the global financial crisis and the unconventional monetary policy of zero-bound interest rates and quantitative easing adopted in response to the crisis, as well as policies in EDEs themselves....

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The Effects of Quantitative Easing Announcements on the Mortgage Market: An Event Study Approach

International Journal of Financial Studies ◽

10.3390/ijfs7010009 ◽

2019 ◽

Vol 7 (1) ◽

pp. 9 ◽

Cited By ~ 1

Author(s):

Gang Wang

Keyword(s):

Interest Rates ◽

Event Study ◽

The United States ◽

Mortgage Market ◽

Quantitative Easing ◽

Study Approach ◽

Mortgage Rate ◽

Mortgage Securities ◽

The Impact ◽

T Distribution

This paper uses event study analysis to estimate the impact of the United States Federal Reserve Bank’s (Fed) quantitative easing (QE) announcements on the mortgage market during the zero lower bound (ZLB) period. A total of 35 QE announcements are identified and their effects are evaluated. The best-fitting integrated generalized autoregressive conditional heteroskedasticity (IGARCH) model with skewed t distribution is used to measure the QE announcement effects on daily changes of the 30-year mortgage rate, the 30-year Treasury rate and the spread between them. Announcements suggesting the start of a new round of QE reduced the mortgage rate tremendously, while the effects of further news diminished. Announcements of an increase in mortgage-backed security purchases decreased the mortgage rate more than the Treasury rate and reduced the credit risk of holding mortgage securities over Treasury securities. The delayed effects of QE announcements on the mortgage rate were less than short-run effects but persistent. We also find that the previous literature overestimates QE effects on interest rates in general.

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The Response of Interest Rates to US and UK Quantitative Easing

The Economic Journal ◽

10.1111/j.1468-0297.2012.02554.x ◽

2012 ◽

Vol 122 (564) ◽

pp. F385-F414 ◽

Cited By ~ 154

Author(s):

Jens H. E. Christensen ◽

Glenn D. Rudebusch

Keyword(s):

Interest Rates ◽

Quantitative Easing

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ECB's QE will buoy EM bond markets

Emerald Expert Briefings ◽

10.1108/oxan-db197388 ◽

2015 ◽

Keyword(s):

Interest Rates ◽

Developing Economies ◽

Emerging Market ◽

Investor Sentiment ◽

Central Banks ◽

Capital Inflows ◽

Bond Markets ◽

Quantitative Easing ◽

Content Type ◽

Large Current

Subject Opposite forces are shaping investor sentiment towards EM assets. Significance Investor sentiment towards emerging market (EM) assets is being shaped by the conflicting forces of a strong dollar and the launch of a sovereign quantitative easing (QE) programme by the ECB. While the latter is likely to encourage investment into higher-yielding assets, such as EM debt, the former will keep the currencies of developing economies under strain, particularly those most sensitive to a rise in US interest rates due to heavier reliance on capital inflows to finance large current account deficits, such as Turkey and South Africa. Impacts EM bonds will benefit from ECB-related inflows, while the strength of the dollar will keep local currencies under strain. Higher-yielding EMs will benefit the most from the ECB's bond-buying scheme since they provide the greatest scope for 'carry trades'. The collapse in oil prices is forcing EM central banks to turn increasingly dovish, putting further strain on local currencies.

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Japan will stay the course on monetary easing

Emerald Expert Briefings ◽

10.1108/oxan-db234184 ◽

2018 ◽

Keyword(s):

Monetary Policy ◽

Interest Rates ◽

Central Banks ◽

Quantitative Easing ◽

Content Type ◽

Bank Of Japan ◽

Target Date ◽

Low Levels ◽

Global Economic Growth ◽

First Time

Subject Monetary policy in Japan. Significance The monetary policy board of the Bank of Japan (BoJ) at its last meeting abandoned its prediction of when the nation will reach its 2% inflation target, the first time it has omitted a target date since Governor Haruhiko Kuroda introduced his policy of radical monetary easing five years ago. Impacts Japan’s interest rates will remain at historically low levels for at least two more years. The yen will remain relatively weak as other countries’ central banks end their quantitative easing programmes. A weak currency plus widespread global economic growth will create strong demand for Japanese exports.

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Spillover effect of United States Monetary Policy on Nigeria’s Financial and Macro Fundamentals

Central Bank of Nigeria Journal of Applied Statistics ◽

10.33429/cjas.11120.5/5 ◽

2020 ◽

pp. 111-145

Author(s):

Patterson C. Ekeocha ◽

Elias A. Udeaja

Keyword(s):

Monetary Policy ◽

Interest Rates ◽

Policy Process ◽

Inflation Rate ◽

Spillover Effect ◽

Spillover Effects ◽

Conditional Variance ◽

Quantitative Easing ◽

External Shocks ◽

The Us

This paper examines spillover effects of U.S monetary policy on macroeconomic fundamentals in Nigeria from January 1985 to December 2018. The study period is partitioned to account for conventional monetary policy (CMP) period, January 1985 to August 2007 and unconventional monetary policy (UMP) period, September 2007 to December 2018. Guided by relevant pre-tests, we find BEKK-VARMA-CCCMGARCH as the most appropriate model. The study finds significant spillover effects of U.S CMP and UMP on interest rate, exchange rate and inflation rate in Nigeria. We, however, observe that while CMP may be a significant accelerator of shocks persistence on interest rates and exchange rates, the extent to which the UMP accelerate shocks in inflation rate tends to vary for different measures of quantitative easing. Thus, in addition to past own shocks and past own conditional variance of these macro fundamentals, understanding their dynamics cannot be in isolation of their vulnerability to external shocks and volatility due to spillover effects of monetary actions in other economies. In formulating monetary policy, it is therefore, imperative for the Central Bank of Nigeria to monitor the monetary policy process of the US to hedge against shocks spillovers.

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Pre- and Post-GFC Policy Multipliers

IMF Working Papers ◽

10.5089/9781513561097.001 ◽

2020 ◽

Vol 20 (237) ◽

Author(s):

Sam Ouliaris ◽

Celine Rochon

Keyword(s):

Central Bank ◽

Interest Rates ◽

Balance Sheet ◽

Quantitative Easing ◽

Dynamic Effects ◽

Real Gdp ◽

Rate Environment ◽

The Impact ◽

Policy Multipliers ◽

The U.S

This paper estimates the change in policy multipliers in the U.S. relative to their pre-2008 financial crisis levels using an augmented Blanchard-Perotti model to allow for the dynamic effects of shocks to the central bank balance sheet, real interest rates and debt levels on economic activity. Given the elevated debt level and significantly larger central bank balance sheet in the U.S. after 2008, the paper estimates the likely impact of new stimulus packages. We find that expenditure multipliers have fallen post-2008 crisis because of higher government debt, implying that the effectiveness of fiscal policy has declined. The analysis also investigates the impact of quantitative easing. The results suggest that it is beneficial, but requires sizable balance sheet interventions to lead to noticeable effects on real GDP. The results are used to assess the impact of the policy packages to address COVID-19. Because of rising debt stocks, dealing with a crisis is becoming more and more costly despite the current low interest rate environment.

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Open Market Operations

The Oxford Handbook of the Economics of Central Banking ◽

10.1093/oxfordhb/9780190626198.013.14 ◽

2019 ◽

pp. 435-454

Author(s):

Jan Toporowski

Keyword(s):

Central Bank ◽

Interest Rates ◽

Central Banks ◽

Transmission Mechanism ◽

Policy Framework ◽

Monetary Transmission ◽

Quantitative Easing ◽

Open Market ◽

Financial Systems

Open market operations are the buying and selling of securities by the central bank. Such operations differ from discount operations in that open market operations are undertaken at the initiative of the central bank rather than a commercial bank. Historically, such trading of securities has predated the setting of interest rates. The emergence of long-term finance and complex financial systems has extended the range of securities in which central banks may deal. Open market operations depend on the policy framework set by the central bank. But such operations are not necessary for the setting of interest rates. Such operations are often undertaken when the monetary transmission mechanism from interest rates appears to have failed, as in the case of recent quantitative easing operations. In general, open market operations have proved effective in times of banking or financial crisis.

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ECB QE and growth may obscure Polish political risk

Emerald Expert Briefings ◽

10.1108/oxan-db198509 ◽

2015 ◽

Keyword(s):

Financial Markets ◽

Interest Rates ◽

Federal Reserve ◽

Economic Recovery ◽

Coalition Government ◽

Parliamentary Election ◽

Quantitative Easing ◽

Content Type ◽

Inconclusive Result ◽

The Us

Significance Having fallen against the resurgent dollar this year, the zloty has lately been strengthening, since the US Federal Reserve surprised financial markets by striking a more dovish stance than expected on both the timing and pace of the anticipated tightening in monetary policy. While the zloty and Polish stocks had suffered because of fears of a rise in US interest rates, local bonds have been underpinned by the ECB's quantitative easing (QE) programme. The effects of QE and a brisker economic recovery may temporarily offset the risk of an inconclusive result in the parliamentary election in October. Impacts Investors have yet to price in the risk of a hung parliament in Poland following October's election. The vote could lead to the formation of a weak and unstable coalition government. The risk of an unstable coalition is particularly high, given the strong likelihood that PO's share of the vote will decline sharply.

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