We study the effects of a conventional monetary expansion, quantitative easing, and the maturity exten- sion program on corporate bond yields using impulse response functions obtained from flexible models with regimes. Using a three-state Markov switching model with time-homogeneous vector autoregressive (VAR) coefficients that emerges from a systematic model specification search, we find that unconventional policies may have been generally expected to decrease both corporate yields and spreads. However, even though the sign of the responses is the one desired by policymakers, the size of the estimated effects de- pends on the assumptions regarding the decline in long-term Treasury yields caused by unconventional policies, on which considerable uncertainty remains. Further tests based on yield spreads and a variable that measures inflation expectations show that, in the crisis regime, unconventional monetary policies do not produce any perverse effects on expected inflation. These results prove robust to adopting a frame- work that allows VAR coefficients to break, to imposing coefficient restrictions that increase parsimony, and to a range of different ordering schemes that identify shocks in alternative ways.
The impact of monetary policy on corporate bonds under regime shifts
Guidolin, Massimo
;Pedio, Manuela
2017
Abstract
We study the effects of a conventional monetary expansion, quantitative easing, and the maturity exten- sion program on corporate bond yields using impulse response functions obtained from flexible models with regimes. Using a three-state Markov switching model with time-homogeneous vector autoregressive (VAR) coefficients that emerges from a systematic model specification search, we find that unconventional policies may have been generally expected to decrease both corporate yields and spreads. However, even though the sign of the responses is the one desired by policymakers, the size of the estimated effects de- pends on the assumptions regarding the decline in long-term Treasury yields caused by unconventional policies, on which considerable uncertainty remains. Further tests based on yield spreads and a variable that measures inflation expectations show that, in the crisis regime, unconventional monetary policies do not produce any perverse effects on expected inflation. These results prove robust to adopting a frame- work that allows VAR coefficients to break, to imposing coefficient restrictions that increase parsimony, and to a range of different ordering schemes that identify shocks in alternative ways.File | Dimensione | Formato | |
---|---|---|---|
Guidolin Orlov Pedio JBF 2017.pdf
non disponibili
Descrizione: Articolo principale
Tipologia:
Pdf editoriale (Publisher's layout)
Licenza:
NON PUBBLICO - Accesso privato/ristretto
Dimensione
4.86 MB
Formato
Adobe PDF
|
4.86 MB | Adobe PDF | Visualizza/Apri |
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.