Monetary surprises and term structure of interest rates: Identification through heteroscedasticity
DOI:
https://doi.org/10.22394/1993-7601-2024-74-5-34Keywords:
идентификация с помощью гетероскедастичности, метод инструментальных переменных, монетарные шоки, временная структура процентных ставок, денежно-кредитная политика Банка РоссииAbstract
How does an unexpected change in the Bank of Russia key rate affect the bond market? This article quantifies the impact of monetary surprises on government bond yields of various maturities. To estimate the causal effect with the joint dynamics of the key rate and bond yields (that is, to solve the problem of endogenous bias), we use the heteroscedasticity-driven identification method that requires weaker assumptions than other alternative methods used in the literature. The results confirm the significant impact of monetary policy surprises on the interest rate term structure, with a greater effect on short-term rates. In contrast to previous studies, the behavior of long-term rates is consistent with the expectations hypothesis: risk premia do not respond significantly to a monetary shock.Downloads
References
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Economics, 118, 331–349. DOI: 10.1016/j.jmoneco.2020.11.002.
Caballero R. J., Simsek A. (2022).
A monetary policy asset pricing model. NBER Working Paper, No. 30132.
Diebold F. X., Rudebusch G. D., Aruoba S. B. (2006). The macroeconomy and the yield curve:
A dynamic latent factor approach. Journal of Econometrics, 131 (1–2), 309–338. DOI: 10.1016/j.jeconom.2005.01.011.
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about the economy. Contributions to Macroeconomics, 4, 1–29. DOI: 10.2202/1534‑6005.1246.
Hanson S. G., Lucca D., Wright J. (2017). The excess sensitivity of long-term rates: A tale of two frequencies. Staff Report, Federal Reserve Bank of New York.
Jarociński M., Karadi P. (2019). Deconstructing monetary policy surprises: The role of information
shocks. American Economic Journal: Macroeconomics, 12 (2), 1–43. DOI: 10.1257/mac.20180090.
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Kuttner K. N. (2001). Monetary policy surprises and interest rates: Evidence from the Fed funds futures market. Journal of Monetary Economics, 47 (3), 523–544. DOI: 10.1016/S0304‑3932(01)00055‑1.
Lucas R. E. (1972). Expectations and the neutrality of money. Journal of Economic Theory, 4 (2), 103–124.
Miranda- Agrippino S., Ricco G. (2021). The transmission of monetary policy shocks. American Economic Journal: Macroeconomics, 13 (3), 74–107. DOI: 10.1257/mac.20180124.
Nakamura E., Steinsson J. (2018). High frequency identification of monetary non-neutrality: The information effect. Quarterly Journal of Economics, 133 (3), 1283–1330. DOI: 10.1093/qje/qjy004.
Nelson C. R., Siegel A. F. (1987). Parsimonious modeling of yield curves. Journal of Business, 60,
473–489. DOI: 10.1086/296409.
Rigobon R. (2003). Identification through heteroscedasticity. Review of Economics and Statistics, 85 (4),
777–792. DOI: 10.1162/003465303772815727.
Rigobon R., Sack B. (2003). Measuring the reaction of monetary policy to the stock market. Quarterly
Journal of Economics, 118 (2), 639–669. DOI: 10.1162/003355303321675473.
Romer C., Romer D. H. (2004). A new measure of monetary shocks: Derivation and implications. American Economic Review, 94 (4), 1055–1084. DOI: 10.1257/0002828042002651.
Svensson L. E. O. (1999). Inflation targeting as a monetary policy rule. Journal of Monetary Economics,
43 (3), 607–654. DOI: 10.1016/S0304‑3932(99)00007‑0.
Taylor J. B. (1993). Discretion versus policy rules in practice. Carnegie- Rochester Conference Series on Public Policy, 39, 195–214. DOI: 10.1016/0167‑2231(93)90009‑L.
Tishin A. (2019). Monetary policy surprises in Russia. Russian Journal of Money and Finance, 78 (4), 48–70.
