scholarly journals Identifying conventional and unconventional monetary policy shocks: a latent threshold approach

2016 ◽  
Vol 16 (1) ◽  
Author(s):  
Takeshi Kimura ◽  
Jouchi Nakajima
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Regime Switching ◽  
Structural Var ◽  
Var Model ◽  
Recursive Identification ◽  
Time Varying ◽  
Unconventional Monetary Policy ◽  
Monetary Policy Shocks ◽  
Policy Shocks

AbstractThis paper proposes a new estimation framework for identifying monetary policy shocks in both conventional and unconventional policy regimes using a structural VAR model. Exploiting a latent threshold modeling strategy that induces time-varying shrinkage of the parameters, we explore a recursive identification switching with a time-varying overidentification for the interest rate zero lower bound. We empirically analyze Japan’s monetary policy to illustrate the proposed approach for modeling regime-switching between conventional and unconventional monetary policy periods, and find that the proposed model is preferred over a nested standard time-varying parameter VAR model. The estimation results show that increasing bank reserves lowers long-term interest rates in the unconventional policy periods, and that the impulse responses of inflation and the output gap to a bank reserve shock appear to be positive but highly uncertain.

scholarly journals The Time-Varying Effects of Monetary Policy on House Prices in China: An Application of TVP-VAR Model with Stochastic Volatility

2018 ◽  
Vol 13 (4) ◽  
pp. 149 ◽  
Author(s):  
Weina Cai ◽  
Sen Wang
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
House Prices ◽  
Var Model ◽  
Time Varying ◽  
Credit Channel ◽  
Monetary Policy Shocks ◽  
Time Varying Parameter ◽  
Policy Shocks ◽  
Interest Rate Channel

The boom of housing market in China in recent years has attracted great concerns from all over the world. How monetary policy affects house prices in China becomes an essential topic. This paper studies the time-varying effects of monetary policy on house prices in China during 2005.7-2017.10, by using a time-varying parameter VAR model. This paper obtains three interesting results. First, there are time-varying features of the responses of house prices to monetary policy shocks half-year and 1-year ahead, no matter through interest rate channel or through credit channel. Second, interest rate channel and credit channel have been enhanced since financial crisis in 2008. Third, the responses of nominal house prices to monetary policy in China are mainly driven by the responses of real house prices, instead of inflation. Finally, this paper gives proper suggestions for each finding respectively to central bank in China.

US unconventional monetary policy and Islamic equity indices

2018 ◽  
Vol 11 (4) ◽  
pp. 575-590 ◽  
Author(s):  
Sayyed Mahdi Ziaei
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Large Scale ◽  
Empirical Work ◽  
Unconventional Monetary Policy ◽  
Monetary Policy Shocks ◽  
Content Type ◽  
Term Spread ◽  
Us Economy ◽  
Policy Shocks

Purpose This paper aims to constitute to the first empirical work that investigated the effects of US unconventional monetary policy shocks on Islamic equities. Design/methodology/approach The authors used the spread between sovereign (term spread) and corporate (corporate spread) yields as proxies of unconventional monetary policy in times that FED implemented different rounds of large-scale asset purchasing programs. Findings This paper demonstrates that monetary policy shocks have significant effects on Islamic equities. The analysis showed substantial evidence that the corporate spread innovation was reflected as a positive signal in Islamic equity markets and has a larger impact on Islamic low leverage equities than term spread. Originality/value The objective of this paper is to shed some insight into the effects of US unconventional monetary policy on low leverage financial assets. It is hypothesized that during this period, specifically from November 2008, unconventional monetary policy and zero bound interest rates have been implemented in the US economy. However, the strength of effects of this range of policies on Islamic financial products is unidentified.

Monetary Policy Spillovers across the Pacific when Interest Rates Are at the Zero Lower Bound

2016 ◽  
Vol 15 (3) ◽  
pp. 1-27 ◽  
Author(s):  
Edda Claus ◽  
Iris Claus ◽  
Leo Krippner
Keyword(s):  
Monetary Policy ◽  
Lower Bound ◽  
Interest Rates ◽  
The United States ◽  
Asset Markets ◽  
Zero Lower Bound ◽  
Unconventional Monetary Policy ◽  
Monetary Policy Shocks ◽  
Short Term ◽  
Policy Shocks

To conduct monetary policy effectively, central banks need to understand the transmission of monetary policy into financial markets. In this paper we investigate the effects of Japanese and U.S. monetary policy shocks on their own asset markets, and the spillovers into each other's markets. Because short-term nominal interest rates have been effectively zero in Japan since January 1998 and in the United States from late 2008, however, monetary policy shocks cannot be quantified by considering observable changes in short-term market interest rates. Therefore, in our analysis we use a shadow short rate―a quantitative measure of overall conventional and unconventional monetary policy that is estimated from the term structure of interest rates. Our results suggest that the operation of monetary policy at the zero lower bound of interest rates alters the transmission of shocks. In particular, we find a limited response of exchange rates during the first episode of unconventional monetary policy in Japan but a significant impact since 2006.

Time-varying response of treasury yields to monetary policy shocks

2019 ◽  
Vol 27 (4) ◽  
pp. 422-442
Author(s):  
Lassaâd Mbarek ◽  
Hardik A. Marfatia ◽  
Sonja Juko
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Yield Curve ◽  
Time Varying ◽  
Monetary Policy Shocks ◽  
Content Type ◽  
Treasury Bond ◽  
Policy Shocks ◽  
Monetary Policy Effectiveness ◽  
The Impact

Purpose This paper aims to examine the Treasury bond yields response to monetary policy shocks in Tunisia under a heterogeneous economic environment. Design/methodology/approach Using a traditional fixed coefficient model, the impact of monetary policy changes on the term structure of interest rates for the whole period from January 2006 to December 2016 is estimated first. Then the stability of this relationship by distinguishing two sub-periods around the revolution of January 2011 is studies. To investigate how the relationship between the monetary policy and the Treasury yield curve evolves over time, a time-varying parameter model is estimated. Findings The results show that the impact of monetary policy is more pronounced at the short end of the yield curve relative to the longer end. Furthermore, this impact declines significantly across all maturities following the revolution and exhibits wide time variation. This evidence supports the negative influence of high levels of uncertainty on monetary policy effectiveness and highlights the desirability of more active monetary policy, especially in turbulent environment. Research limitations/implications The impact of uncertainty on the effectiveness of monetary policy shocks needs to be explored further in future research to understand the structural sources of uncertainty and their dynamic interactions with monetary policy and risk aversion in asset markets. Practical implications A more active role of the central bank to influence the yield curve mainly through Treasury bond purchases covering medium and long maturities may be warranted. Communication also needs to be reinforced to ensure predictability of the monetary policy stance. Originality/value This paper extends the empirical literature on the pass-through of monetary policy to interest rates for an emerging country in context of transition by estimating a state-space model to test the time-varying behavior and examine the influence of increased economic uncertainty on monetary policy effectiveness.

scholarly journals Spillovers of US Conventional and Unconventional Monetary Policies to Russian Financial Markets

2018 ◽  
Vol 10 (2) ◽  
pp. 14 ◽  
Author(s):  
Shigeki Ono
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Interest Rates ◽  
Stock Prices ◽  
Monetary Policy Shocks ◽  
Federal Funds Rate ◽  
Monetary Policies ◽  
Endogenous Variables ◽  
Policy Shocks ◽  
Monetary Policy Shock

This paper investigates the spillovers of US conventional and unconventional monetary policies to Russian financial markets using VAR-X models. Impulse responses to an exogenous Federal Funds rate shock are assessed for all the endogenous variables. The empirical results show that both conventional and unconventional tightening monetary policy shocks decrease stock prices whereas an easing monetary policy shock does not increase stock prices. Moreover, the results suggest that an unconventional tightening monetary policy shock increases Russian interest rates and decreases oil prices, implying reduced liquidity in international financial markets.

scholarly journals The Time-Varying Effect of Monetary Policy on Asset Prices

2020 ◽  
Vol 102 (4) ◽  
pp. 690-704 ◽  
Author(s):  
Pascal Paul
Keyword(s):  
Monetary Policy ◽  
Asset Prices ◽  
House Prices ◽  
The United States ◽  
Model Parameters ◽  
Time Varying ◽  
Real Economy ◽  
Monetary Policy Shocks ◽  
Vector Autoregressive ◽  
Policy Shocks

This paper studies how monetary policy jointly affects asset prices and the real economy in the United States. I develop an estimator that uses high-frequency surprises as a proxy for the structural monetary policy shocks. This is achieved by integrating the surprises into a vector autoregressive model as an exogenous variable. I use current short-term rate surprises because these are least affected by an information effect. When allowing for time-varying model parameters, I find that compared to the response of output, the reaction of stock and house prices to monetary policy shocks was particularly low before the 2007–2009 financial crisis.

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