The fed and the term structure: Addressing simultaneity within a structural VAR model

Farka, Mira; DaSilva, Amadeu

doi:10.1016/j.jempfin.2011.08.004

Cited by 5 publications

(3 citation statements)

References 36 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Results are summarized in Table A11. For the conventional period, we find that the removal of intermeetings implies a larger sensitivity to target rate shocks but a smaller reaction to forward guidance surprises, in line with the ‘signalling’ explanation (Farka & DaSilva, 2011; Fleming & Piazzesi, 2005). At the ZLB, the removal of non‐FOMC events results in smaller estimates for LSAP shocks suggesting that markets oftentimes became aware of important policy decisions, particularly related to the LSAP programme, not from scheduled FOMC releases but from a number of speeches and Congressional testimony by chairman Bernanke.…”

Section: Sensitivity Analysissupporting

confidence: 80%

Equity market and the transmission channels of monetary policy: Before and after the zero lower bound

DaSilva

Farka

2023

Euro Fin Management

Self Cite

View full text Add to dashboard Cite

We examine the effectiveness of the interest rate channel and the credit channel of monetary policy before and after the zero lower bound (ZLB), using intraday stock returns. We construct a number of industry‐specific and firm‐specific indicators to capture the sensitivity of firms' demand to interest rates (interest rate channel) and firms' financial constraints (credit channel). We find that the transmission of monetary policy has shifted across both periods. Conventional monetary policy works through both the neoclassical interest rate channel and the credit channel, while unconventional policy is propagated primarily via the credit channel which became even more effective at the ZLB. Before the ZLB the transmission channels operate primarily through target rate shocks rather than forward guidance announcements, whereas both forward guidance and large scale asset purchases were equally important for the credit channel at the ZLB. We also find strong evidence that transmission channels are asymmetric depending on the state of the stock market (bull/bear, tighter/easier credit conditions, high/low volatility), and the type of policy surprises (positive/negative). Our findings are robust with respect to a number of model extensions and alternative specifications.

show abstract

Section: Sensitivity Analysissupporting

confidence: 80%

Equity market and the transmission channels of monetary policy: Before and after the zero lower bound

DaSilva

Farka

2023

Euro Fin Management

Self Cite

View full text Add to dashboard Cite

show abstract

“…M M . 27 For example, Fleming and Piazzesi (2005) and Farka and DaSilva (2011) find that the response of Treasury rates to conventional policy surprises during unscheduled intermeetings is more attenuated than in normal times, and Glick and Leduc (2018) report similar results for the dollar. 28 Intermeeting moves tend to reveal a weaker than expected future economic landscape.…”

Section: Alternative Breaks Between Conventional and Unconventional P...mentioning

confidence: 97%

The credit channel of monetary policy before and after the zero lower bound: Evidence from the US equity market

Farka

2022

J of Financial Research

Self Cite

View full text Add to dashboard Cite

I evaluate the effectiveness of conventional and unconventional monetary policy measures by examining the transmission mechanism through the credit channel before and after the zero lower bound (ZLB). I focus on the impact of conventional and unconventional policy shocks on a cross-section of portfolio returns sorted on characteristics that capture firms' financial constraints (size and book-to-market). Results show that the credit channel of monetary policy is even more relevant at the ZLB relative to the previous period, and its effectiveness is almost entirely attributed to the high sensitivity of financially constrained firms (small and value stocks) to unconventional surprises. I find strong evidence that the reaction of portfolio returns to policy shocks is asymmetric depending on the state of the economy (recession vs. expansion), type of policy surprise (positive vs. negative), and aggregate level of market volatility. My findings are robust to several model extensions and alternative specifications.

show abstract

“…In addition to monetary policy shocks (see e.g. Wu, ; Farka and DaSilva, ), the slope can also be affected by variables such as output, employment (Lu and Wu, ) and other business cycle indicators. The curvature captures the monetary policy stance of the central bank (see e.g.…”

Section: Introductionmentioning

confidence: 99%

The Sovereign Yield Curve and the Macroeconomy in China

Yan

Guo

2015

Pacific Economic Review

View full text Add to dashboard Cite

A dynamic Nelson-Siegel model is adopted to estimate three time-varying factors of yield curves, the level, the slope and the curvature, and a vector autoregressive model is built to study interactions between macro variables and the yield curve. Results show that, first, money supply growth is a more effective instrument to curb inflation than the monetary policy interest rate; however, the central bank also adjusts the interest rate to stabilize money supply. Second, investment is an important measure to stimulate the Chinese economy, but it also pushes up money supply growth, which results in higher inflation. Third, the yield curve reacts significantly to innovations to investment growth and money supply growth. The segmentation of China's bond market hinders the efficient implementation of monetary policy, and the monetary policy transmission mechanism is still weak in China. Finally, interactions between the yield curve and the macroeconomy in China are nearly unidirectional. Macroeconomic variables reshape the yield curve, but direct adjustments of the yield curve do not significantly change macroeconomic variables. Due to the incomplete liberalization of financial markets, there exists a wide disjunction between the real economy and financial markets in China.

show abstract

The fed and the term structure: Addressing simultaneity within a structural VAR model

Cited by 5 publications

References 36 publications

Equity market and the transmission channels of monetary policy: Before and after the zero lower bound

Equity market and the transmission channels of monetary policy: Before and after the zero lower bound

The credit channel of monetary policy before and after the zero lower bound: Evidence from the US equity market

The Sovereign Yield Curve and the Macroeconomy in China

Contact Info

Product

Resources

About