Top PDF Unconventional monetary policy in practice

Unconventional monetary policy in practice

Unconventional monetary policy in practice

after the introduction of several “unconventionalmonetary policy measures, the balance sheet more than doubled (+126 percent). The magnitude of this expansion is quite surprising, since it clearly outweighs the one of the BoJ’s balance sheet between 2001 and 2006 (+35 percent), as can be seen in Chart 39. This trend is even more striking with respect to total reserves (same time periods): In Japan, this balance sheet item increased by 549 percent, whereas in the US, it shot up by as much as 7787 percent. Yet one should be careful when comparing changes of different central bank balance sheets or of major components of them since for addressing strains in financial markets, the composition of the balance sheet is at least equally important because one of the main problems was not an overall lack of liquidity in the banking system but a poor distribution of it. Furthermore, the size of the balance sheet does not necessarily reveal anything about the stance of monetary policy as the movements of the size of the balance sheet and the one of the interest rate target do not always coincide. When looking at the different categories of the Fed’s balance sheet, one can see that the basic patterns are roughly comparable to the ones of their Japanese counterparts: In both cases, net autonomous factors are negative and net monetary policy operations are positive, thereby also determining the amount of total reserves since this category is, as explained above, a residual of the two other components. But also with respect to the single items on the balance sheets, it is possible to identify certain commonalities. In both cases, the amounts of foreign currency assets, reverse repurchase agreements and securities held outright increased over the respective periods, while the outstanding amount of reverse repurchase agreements decreased in the Japanese as well as in the American case. There are also some items, however, that are unique to the Fed’s balance sheet, and hence need to be explained. Central bank liquidity swaps, for a start, refer to reciprocal currency arrangements between the Fed and other major central banks such as the ECB and the BoE to provide them with a source of US-Dollar since many of their national banks faced difficulties in refinancing themselves in this currency. These arrangements were introduced in December 2007 as a response to the strains in interbank markets. Nine months later (September 2008), the US Treasury announced to create the so called “Supplementary Financing Program (SFP)”, which should provide some assistance to the Fed’s monetary policy. Under this program, the Treasury issues short-term debt to drain reserves from the banking system. The proceeds are placed in the supplementary financing account at the Fed (Federal Reserve Bank of New York 2009q).
Show more

109 Read more

Unconventional Monetary Policy in Theory and in Practice

Unconventional Monetary Policy in Theory and in Practice

The Fed and the ECB implemented a series of unconventional monetary measures aimed at avoiding a meltdown of the financial system and mitigating the effects of the turmoil on the real economy and on prices. The Fed modified its operational framework on many levels; the innovations implemented by the ECB were also substantial, but somehow less pervasive, due to a series of factors. First, the operational framework of the ECB was already very flexible before the crisis and therefore only modest modifications were needed. Second, in the US, capital markets play a more important role in providing credit to the economy than in the euro area. This implies that while the ECB could limit its efforts to improving and expanding the provision of funds to the banking system, the Fed had to resort to more innovative measures with broader scope. Third, in the US the impact of the crisis on the inflation outlook was more acute. This led the Fed to slash official interest rates to zero and to start a programme of asset purchases to reduce long-term yields and so provide further stimulus to the economy and avoid a deflation spiral. The difference in the size and scope of the unconventional measures adopted by the two central banks is reflected in the larger increase in the size of the Fed’s balance sheet and in the more noticeable changes in its composition.
Show more

40 Read more

Perils of unconventional monetary policy

Perils of unconventional monetary policy

rities, setting portfolio weights as a function of expected nominal asset prices would have the same outcome. This contrasts with Magill and Quinzii (2014b) and Adao, Correia, and Teles (2014), where explicit targets for asset prices, independent of equilibrium, pin down portfolio weights. This would correspond to setting targets (or portfolio weights) to depend on fundamentals, or primitives, or according to exogenous rules (such as under conventional policy). Given the difficulties in obtaining information on the primitives or exogenous processes in the economy, policy makers in practice need to set targets based on either exogenous rules, or past, present or expected (future) endogenous variables. As unconventional policy aims to affect the future course of the economy, targets invariably will depend on forecasts of the future. Our point here is that constructing balance sheet portfolios based on such forecasts may result in the portfolios being compatible with other ex-post realisations (of inflation, asset prices etc) while rules based on past variables may not be compatible with stationary endogenous processes. In contrast, rules based on re- alised endogenous variables (such as current GDP, inflation etc) can implement a unique, if not desired, stationary path of inflation.
Show more

44 Read more

The theory of unconventional monetary policy

The theory of unconventional monetary policy

Our explanation builds on the idea that general equilibrium models of money always contain multiple equilibria. We believe that this idea is important not just in theory, but also in practice. In our view, a significant portion of asset price fluctuations in the real world are caused by self- fulfilling shifts from one equilibrium to another that cause inefficient shifts of wealth. Although we have explained our case in a simple two-period model, multiple equilibria are endemic to monetary models and our argument is much more general than the model that we have used to explain it. The fact that asset price volatility is Pareto inefficient provides, we believe, a strong case to make Qualitative easing a permanent component of future financial policy.
Show more

28 Read more

Unconventional monetary policy, spillovers, and liftoff: implications for Northeast Asia

Unconventional monetary policy, spillovers, and liftoff: implications for Northeast Asia

dramatically during 2015 Congressional debates over the authorization of trade promotion authority (TPA) which was linked to the imminent conclusion of negotiations over the Trans- Pacific Partnership (TPP) agreement. Unprecedented legislation was proposed directly conditioning trade policy on currency concerns. 12 In the end, the TPP agreement commits all TPP countries “to avoid unfair currency practices and refrain from competitive devaluation. TPP countries will publicly report their foreign-exchange intervention and foreign reserves data,” some for the first time. “Officials from all TPP countries will consult regularly to address macroeconomic issues, including to engage on efforts to avoid unfair currency practices.” The declaration confirms the TPP countries “will avoid manipulating exchange rates to gain an unfair competitive advantage over other Parties.” Commits those countries “to take policy actions to foster an exchange rate system that reflects underlying economic fundamentals and to avoid persistent exchange rate misalignments” and “to refrain from competitive devaluation and targeting exchange rates for competitive purposes” (Joint Declaration 2015). Were Korea to join TPP, the currency market intervention reporting would go beyond current practice, but it would not seem to be too heavy a lift.
Show more

36 Read more

Unconventional monetary policy the Euro Zone

Unconventional monetary policy the Euro Zone

A direct effect of QE may in principle come about via banks’ lending, though this has been thought to be less significant in practice. QE results in the commercial banks holding far more liquid assets in the form of reserves held at the Central Bank than they would have chosen to do. According to the old textbook money multiplier theory of the money supply, banks increase their loans to customers when they have excess reserves, until they are fully loaned up, limited by the amount of reserve assets they can obtain. If this was true in practice, that banks were restrained from lending by the availability of reserves, and would lend as much possible subject to that constraint, then QE, by increasing the commercial banks’ holdings of reserves, would increase bank loans and the money supply. It is possible that, when interest rates are stuck at the zero lower bound, there is no further demand for loans and banks’ offers to lend find no takers. This is the idea that when economic activity is very depressed, attempting to expand the money supply is like pushing on a piece of string, and will be ineffective. In practice the recession has been characterized by very restricted bank lending in many European countries, with banks unwilling to lend despite have large excess reserves, having tightened lending criteria, and at the same time
Show more

21 Read more

Federal Reserve's Unconventional Monetary Policy After the Financial Crisis

Federal Reserve's Unconventional Monetary Policy After the Financial Crisis

For future monetary policy regime it is also noteworthy to assess the risks associated with the unconventional policies that were practised after the financial crisis. Even though an economy might not recover as quickly as policy makers would hope after a recession as seemed to happen after the financial crisis, continuing extremely easy mon- etary policy conduct can actually create more risks than solutions with it. If the prob- lems in economic growth are structural and not effectively responsive to monetary poli- cy adjustments as suggested by the results of this study, a central bank may put itself in a vulnerable position if it continues to practice the types of levels of easy monetary pol- icy for seven years or more as was seen in the sample period of this study. If a new eco- nomic shock or a recession were to strike while the monetary policy regime is already near its most easy levels, the central bank would have little room to ease its policies any more, and the end results could be dangerous. In addition keeping directing interest rates at zero for many years can mean that different asset markets such as equities and bonds may begin to form valuation bubbles, which could drive the economy back into recession as has happened many times in the US before. For instance a stock market crash in zero interest rate environment would mean that investors would simultaneously loose their asset values from equities, but would not have any protection from fixed income assets, since bond yields would be at low levels already as well.
Show more

79 Read more

The Impact of Unconventional Monetary Policy Tools on Inflation Rates in the USA

The Impact of Unconventional Monetary Policy Tools on Inflation Rates in the USA

The American model is considered as one of the most important successful experiments in applying unconventional monetary policy tools, due to the approach of the Euro indicators, which also defined a variation in the results achieved by member states due to the lack of economic homogeneity between them and different financing structure and the degree of presence of financial intermediation in the markets etc. (Atsushi & Barbara, 2018). However, in terms of indicators, inflation rates in the Euro area are still meager after almost ten years of actual application of unconventional monetary policy tools (Gambacorta, Hofmann, & Peersman, 2014). As for the Japanese experience, it was the first to implement unconventional monetary policy tools through the implementation of quantitative easing programs during the period 2001-2006, but the weak results and repercussions of the recent financial crisis forced the Japanese Central Bank to re-apply new packages of unconventional monetary policy tools to developing countries (Morgan, 2009).
Show more

16 Read more

The Effects of Unconventional Monetary Policy on Asset Prices Across Markets

The Effects of Unconventional Monetary Policy on Asset Prices Across Markets

I chose to expand on a few of these studies in order to better evaluate the spillover effect of these unconventional policies on assets other than the assets that the Fed was directly purchasing . I looked at numerous asset prices across different securities markets and used a principal components analysis in an attempt to find a better variable indicator of investors’ inflation expectations , economic growth expectations , and market risk appetite . Using this type of analysis , I was looking for the best combination of high- frequency variables that would result in an improved ability to measure the implications of unconventional monetary policy . For example , there are many different types of variables that indicate investors’ inflation expectations—TIPS breakevens , inflation swaps , and even certain commodity prices such as gold and oil . Though some of these assets are highly correlated in their responses to quantitative easing and other monetary policy actions , they don’t react identically . By accounting for some of the variability across these individual assets that indicate similar expectations or market conditions , a principal component variable can be used to find the best combination of variables to predict the effects of future monetary policy and to measure the effects of past unconventional policy .
Show more

42 Read more

Differential effects of unconventional monetary policy on syndicated loan contracts

Differential effects of unconventional monetary policy on syndicated loan contracts

Our estimation strategy begins with baseline models to explain loan spread and loan maturity of the loan contracts. As both terms (loan spread and maturity) are important for exerting practical influence on firms’ decisions on investment and investment activities, a large body of the litera- ture explores the factors influencing them and explains the borrower’s choice by focusing on, for example, agency costs (in Myers (1977) and Barnea et al. (1980)), asymmetric information (in Flannery (1986), Diamond (1991), and Guedes & Opler (1996)), the cyclical nature of debt and debt maturity (in Emery (2001) and Becker & Ivashina (2014)), supply-side factors (in Cust´odio et al. (2013)), taxes (in Brick & Ravid (1985) and Fan et al. (2012)), and other market friction. From these findings from the literature, we explored the determinants of loan spread and maturity from our baseline results. Furthermore, we controlled the observed and unobserved characteristics of the borrower and its relevant business cycle variation with borrower fixed effects and industry- by-year fixed effects stemming from the borrower (firm) balance-sheet channel of monetary policy for the following tests. Then, we added variables relating to macroeconomic and credit supply conditions with bank-by-year fixed effects to fulfill the specifications, which controlled for the bank’s unobserved and time-varying heterogeneity stemming from the bank balance-sheet channel of monetary policy.
Show more

49 Read more

Unconventional US Monetary Policy: New Tools, Same Channels?

Unconventional US Monetary Policy: New Tools, Same Channels?

of unconventional monetary policy through periods of different financial and economic conditions, we cannot model this transmission mechanism explicitly by including a suitable control variable. Looking at the financial side of the economy, the reduction of the term spread triggers a decrease in net interest margins of commercial banks: since the cost of funding (the short-term interest rate) is unaltered and tied to the zero lower bound, the revenues of lending (approximated by the long-term interest rate) decreases. As in Adrian and Shin ( 2010 ) this implies an inward shift of the supply curve of credit and is likely to contain new lending. This effect, however, might be offset by a stronger demand for lending, since lower long-term rates make it more attractive to take a loan. Since a priori we do not know which of these effects is likely to dominate, we leave the signs on growth in bank assets unrestricted. Next and in line with the assumption about the monetary policy shock, we assume an initial increase in banks’ deposits. This increase is rather mechanical since the proceeds of the asset purchase will be deposited in the investors’ banks’ accounts raising deposits of the banking sector and might be rather short-lived as pointed out in Butt et al. ( 2014 ). 8
Show more

38 Read more

How Does Unconventional Monetary Policy Influence the Economy in Japan?

How Does Unconventional Monetary Policy Influence the Economy in Japan?

2, the effect of the rise does not disappear during QQE. According to the responses of the inflation rate (Fig. 2B), the accumulated median impulse responses of the inflation rate to a positive monetary policy shock rise in the whole period. However, the degrees are different during QE, during CME and during QQE. The monetary policy shock has a small effect (both short and long term) on the inflation rate during QE. However, the effect on the gradual rise in the inflation rate in the long term during CME clarified the policy’s time horizon based on the understanding of medium to long-term price stability in October 2010. In addition, the effect on the remarkable rise in the inflation rate after the QQE period introduced inflation targeting. According to the responses of the long-term interest rates (Fig. 2D), the monetary policy shock decreased the long-term interest rate, and the degrees are remarkable during the QE period and during the QQE period. In addition, this tendency is particularly apparent during the QQE period. According to the responses of stock prices (Fig. 2E), a monetary policy shock raises stock prices in the short term for the whole period. In addition, the accumulated median impulse responses of stock prices to a positive monetary policy shock rise not only in the short term but also over the long term during unconventional monetary policy periods. Specifically, the responses are positive in the short and long terms during the period from 2003 to 2006 and from 2013 to 2016. The effect of the rise (0.8) can be confirmed in all periods during QQE, whereas the effect of the rise declines gradually after a peak (0.6) in the year 2003 during QE. In addition, the effect of a rise during QQE is stronger than that during QE. According to the responses of the exchange rate (Fig. 2F), monetary policy shock decreases the exchange rate in the short term over the whole period. However, the effect of the decrease in the short term became weak during 2002 to 2006. In the other period, the monetary policy shock tended to decrease the exchange rate in the short term, and the exchange rate returns to zero or a positive level in the long term. In addition, the responses of exchange rates are weaker than those of stock prices. According to the responses of bank lending (Fig. 2G), a monetary policy shock decreases bank lending under unconventional monetary policy. In addition, the decrease in bank lending during QE (0.2) is relatively larger than during QQE (0.07).
Show more

23 Read more

Unconventional monetary policy : theoretical foundations, transmission mechanisms and policy implications

Unconventional monetary policy : theoretical foundations, transmission mechanisms and policy implications

context, a widespread critique against Wallace is based on his assumption of perfectly flexible financial markets and rational arbitrageurs not subject to any borrowing con- straint. In particular, if binding constraints on participation in certain markets exist, this could invalidate the irrelevance result, because the neutralization of asset purchases à la Wallace might be distorted. To see this, consider the following scenario: suppose the cen- tral bank engages in quantitative easing by purchasing long-term government bonds. For those purchases to be neutralized, rational investors must realize the arbitrage op- portunity and short-sell government bonds by the same amount. Yet if arbitrageurs are credit constraint – or if they refuse to short-sell the entire amount because that would imply a heavily undiversified portfolio – monetary policy will succeed in pushing bond prices above their fundamental value. In fact, given the unlimited funds of the central bank, even deep-pocket investors will at some point run against their budget constraint. Thus, if limits to arbitrage exist, the resulting market segmentation gives monetary po- licy the power to influence asset prices through the so-called portfolio balance effect. 22
Show more

358 Read more

Buying a stairway to heaven. The ECB's unconventional monetary policy

Buying a stairway to heaven. The ECB's unconventional monetary policy

1.2. BANKS AND THE MONEY SUPPLY PROCESS 25 deposited in Bank Gamma and the deposit creation process ceases. In gen- eral, this happens when banks do not make loans or buy securities in the full amount of their excess reserves. Depositors’ decisions regarding how much currency to hold and banks’ preference about the amount of excess reserves to hold should be taken into account for deriving a more precise formula for the money multiplier. The conclusion is that a 1% change in the high powered money is not necessarily translated into a 1% change in currency even if the mechanism of multiple expansion of deposits is still functioning. This is the same to acknowledge the fact that the central bank’s ability to control the money supply may be limited, especially when the money multiplier is influ- enced by factors that decreases its magnitude. 7 However, in the long run the behaviour of banks and depositors is assumed to be stable and predictable. Hence, a close link between the monetary base and the quantity of money supply exists. This implies that the central bank have the ability to control the money supply via changes in high powered money, M0. Accordingly, open market operations are conducted not to influence the cost of borrowing funds from banks, but to directly affect the money supply (Friedman, 1968). This operating principle is part of the reserve position doctrine (RPD) and contrasts the view put forward by the short-term interest rate doctrine (SID) by which the central bank sets the short-term (interbank) interest rate by standing ready to meet the banking system’s demand of reserves (Bindseil, 2004).
Show more

117 Read more

Post 2007 crisis unconventional monetary policy in the UK

Post 2007 crisis unconventional monetary policy in the UK

The  economy  in  this  model  consists  of  three  sectors:  households;  nonfinancial  firms;  and  banks.  Households (HHs) consume, supply labour, and accumulate financial assets including money, government  gilts  and  corporate  bonds.  The  nonfinancial  productive  sector  hires  labour  to  produce  final  goods  and  services. The model employs the typical working capital constraint that requires the firms to pay the wages  in advance (see for example Corugedo et al. (2011)). The gap between the outgoing and incoming cash  flows is covered using debt financing that is available from different sources. This sector contains two firm  types: big firms (BFs) and small and medium enterprises (SMEs). The two types differ in their accessibility  to debt markets; that is, while BFs have access to all debt markets, SMEs are restricted to bank lending as  a sole source of debt financing. Banks accept HHs’ deposits and provide loans to the other three agents in  the economy, i.e. mortgages to households, business loans to BFs, and business loans to SMEs. The market  power  of  banks  varies  between  these  three  credit  markets;  that  is,  banks  enjoy  strong  positions  in  mortgages and SMEs loans markets, whereas the BFs loans market has a rather competitive supply side  and a monopolistic demand side. The following sections describe the model of this chapter in detail. Lastly,  to  keep  the  analysis  simple,  the  model  does  not  include  a  government  budget  constraint  and  hence  abstracts from the constraints on the implementation of monetary of fiscal policies. The model tries to  evaluate  the  impact  of  QE  policy  on  bank  lending  rather  than  building  a  comprehensive  picture  of  its  influence on different economic variables and sectors it is intended to affect.  
Show more

174 Read more

The impact of unconventional monetary policy on euro area public finances

The impact of unconventional monetary policy on euro area public finances

by such favourable government debt cost dynamics as those which were subsequently observed. Thus, in the euro area as a whole and in Spain, the stability programmes published by the various euro area Member State governments in spring 2014 projected that the implicit rate on debt would stabilise at the levels prevalent as of that date, with the result that said rate was expected to stand at around 3.2% in the euro area and at 3.6% in Spain in 2016, whereas the actual rate was 2.4% in the euro area and 2.8% in Spain (see Chart 3.1). This projection was consistent with the profile of the interest rate measured by the implicit forward rates in the yield curve estimated as of those dates (see Chart 3.2). In general, fluctuations in interest rates, and, especially, in long-term rates at issuance are due to different types of factors. Consequently, the recent decline observed in long-term interest rates in the euro area cannot be attributed solely to monetary policy. In particular, these rates may also have fallen for other reasons, such as revisions in the outlook for economic growth and inflation, changing conditions in the external environment, economic policy measures adopted nationally in various spheres, such as structural reforms, as well as the fiscal consolidation implemented throughout most of the euro area.
Show more

8 Read more

The effect of Unconventional Monetary Policy on Cross-Border Bank Loans

The effect of Unconventional Monetary Policy on Cross-Border Bank Loans

Note. -- The table reports estimates from ordinary least squares regressions. The dependent variable is the natural logarithm of Turkish banks' cross-border borrowing (from countries and lender banks with different loan types, maturities and currency types) for lender banks with different capital or liquidity ratios. Table 1 contains the definition of all variables and the summary statistics for each included variable. Global Liquidity Variables are the VIX, the monthly change in the US real policy rate, the 3-months US TED Spread and total M2 growth rate of four financial centers (US, EA, UK, Japan). Lender Country Variables are real GDP growth, inflation rate, monthly change in policy rate and monthly change in real effective exchange rate. Turkey (TR) Macro Variables are yearly change in industrial production index, inflation rate, monthly change in BIST o/n interest rate and monthly change in real effective exchange rate. Lender Bank Variables include the lagged values of Bank Total Assets, Capital Ratio, Liquidity Ratio, Credit Ratio, Deposit Ratio, ROA Ratio and NPL Ratio. Borrower Bank Variables include the lagged values of Bank Total Assets, Capital Ratio, Liquidity Ratio, Credit Ratio, Deposit Ratio, ROA Ratio and NPL Ratio. Analysis covers the period of 2008:M10 – 2014:M12. Coefficients are listed in the first row, robust standard errors are reported in the row below, and the corresponding significance levels are placed adjacently. Σ indicates sum of the three coefficients on the indicated lag terms (and corresponding standard errors and significance level). "Yes" indicates set of characteristics or fixed effects. "No" indicates set of characteristics or fixed effects is not included. "-" indicates that the indicated set of characteristics or fixed effects are comprised in the wider included set of fixed effects. *** Significant at 1%, ** significant at 5%, * significant at 10%.
Show more

53 Read more

Unconventional monetary policy of the European Central Bank: A brief recapitulation

Unconventional monetary policy of the European Central Bank: A brief recapitulation

In December 2018, the European Central Bank (ECB) brought to an end the asset purchase programme (APP), an unconventional instrument of monetary policy activated in response to the financial crisis and the economic crisis that followed. It was yet another tool within the whole series of actions ranging from lowering – in two series – interest rates to zero (where the deposit rate turned negative), to mod- ifications of conditions for running open market operations and standing facilities, to further asset purchase programmes. The objective of actions taken went beyond a narrow mandate of the ECB, that is, to keep inflation low (close to, but below 20%) and stable (Mersch, 2019). Further steps were taken to boost economic growth in the eurozone countries by improving the functioning of the financial markets. Dis- continuing the APP provides an opportunity to summarize the current state of the research on the effects of unconventional measures of operations taken. The article is an overview and provides the basis for further in-depth analyses. It aims to pro- vide an overview of the research and organize the current state of knowledge on the effects of the unconventional monetary policy of the ECB. The paper also takes up the issue of possible options for using solutions adopted by the ECB in the activities of the National Bank of Poland.
Show more

10 Read more

Unconventional monetary policies

Unconventional monetary policies

tary Transactions, OMT). We also consider conventional interest rate policy and less important liquidity measures to ensure that the effect of main unconventional policies is not due to other announcements, sometimes made on the same day. Given the exceptional circum- stances during the sovereign debt crisis we also take into account the European Financial Stability Facility / European Stability Mechanism announcements and add a sovereign crisis dummy for the peaks of the crisis. In order to put the ECB measures into perspective, we also include quantitative easing announcements in the U.S. and the U.K. The results show that among the ECB unconventional measures, long- term sovereign bond purchases (SMP) proved to be the most effective in lowering longer-term borrowing costs for both banks and govern- ments. The effects are the most important for the euro-area sovereign spreads and range from 35 basis points (Italy) to 476 basis points (Greece). As a comparison, we show that the U.S. and U.K. sovereign spreads also fell following the sovereign bond purchases announced by the Fed and the Bank of England but the magnitude of the ef- fect was much smaller: respectively 5 and 9 basis points. The strong impact in the euro area suggests that the central bank intervention in sovereign market is particularly effective when the sovereign risk is important. The SMP also reduced longer-term bank refinancing costs, namely covered bond spreads, as the smaller country default risk im- proves the financial standing of the country financial institutions. The second bond purchasing program, OMT, had a similar impact on bor- rowing conditions as SMP: it diminished, albeit to smaller extent, sovereign spreads and covered bond spreads, especially in periphery euro area countries. As far as covered bond purchase programs are concerned, they reduced the spreads in all markets studied: covered bond spreads, sovereign bond spreads and to some extent the money market spreads. Finally, among the exceptional liquidity provisions, the 3-year refinancing operations (3y LTRO) were the only measure that succeeded in reducing bank refinancing costs and its impact was particularly strong in money market.
Show more

213 Read more

The informational content of unconventional monetary policy on precious metal markets

The informational content of unconventional monetary policy on precious metal markets

Any asymmetric outcome of the unconventional monetary policy effects on the risk-return profile of the two commodities would leave space for arbitrage opportunities. In this line, it is expected that the correlation between the two commodities would exhibit potential structural breaks underlying the necessity for active risk management. Therefore after identifying possible effects on the risk-return profile, cross correlations between gold and silver markets are investigated around the unconventional monetary easing announcements by using the multivariate conditional volatility model of Engle and Kroner (1995). The full BEKK model with a linear filter on the mean equation is described by the following equations:
Show more

25 Read more

Show all 10000 documents...