US-euro area term structure spillovers, implications for central banks

Arbeitspapier

Spillovers between the US and euro area term structures of interest rates are examined. Implications for monetary policy are investigated using term-structure metrics that proxy conventional and unconventional instruments, i.e. the short rate, the 10 year term premium, and the 10 year risk-free rate. A new discrete-time arbitrage-free term structure model is used to extract these variables, at a daily frequency during the period covering 2005 to 2016. Relying on forecast error variance decompositions, following Diebold and Yilmaz (2009), it is found that transatlantic spillovers have increased by approximately 11%-points during the examined period, making it more dicult for central banks to directly assess the impact of their policies.

Object Details

• ISBN: 978-92-899-2228-9
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1980

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Interest Rates: Determination, Term Structure, and Effects ; Central Banks and Their Policies
• Subject: international spillovers ; monetary policy ; yield curve modelling

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Nyholm, Ken
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2016

Further information

• DOI: doi:10.2866/745702
• Handle: http://hdl.handle.net/10419/154413
• Last update: 10.03.2025, 11:42 AM CET