Doctoral thesis

Multi-country study of yield curve dynamics in a monetary policy framework

Multi-Country Study Of The Yield Curve In A Monetary Policy Framework: This paper studies the yield curve in 20 countries with a special focus on monetary policy framework, most im ...

Author(s) :

Igor Lojevsky, PhD

Vice Chairman (Retired) at Deutsche Bank AG (USA)

Abstract :

Multi-Country Study Of The Yield Curve In A Monetary Policy Framework: This paper studies the yield curve in 20 countries with a special focus on monetary policy framework, most importantly in ation targeting (IT) and exchange rate (ER) anchor. It has been shown that the Nelson-Siegel (NS) approach provides a close  to the actual yields under both monetary regimes. The average yields in the group of countries with ER anchor are signi cantly greater than in IT countries across all maturities. Statistical comparison of NS parameters suggests that unequal yield curve levels explain the di erence in yields. The paper also evaluates the impact of a monetary framework change in Slovakia, Hungary, Turkey and Russia.

Multi-Country Study Of Macro-Financial Linkages In A Monetary Policy Framework: This paper studies macro- nancial linkages in 7 countries, including the world's largest economies, with two essential monetary policy frameworks: in ation targeting (IT) and exchange rate (ER) anchor. The research is based on Vector Auto-regression models that combine macroeconomic variables and Nelson-Siegel parameters, which parsimoniously describe the yield curve. Generalised impulse responses reveal the patterns of dynamic linkages between the yield curve and macroeconomic variables. It has been discovered that shocks in consumer price index (CPI) result in a temporary upward deviation of the level of yield curve in IT countries, while the impact of CPI shocks is more persistent in countries with ER anchor. Shocks in yield curve level bring a temporary increase in CPI under both monetary policy frameworks, most likely via anchoring in ation expectations. Shocks in the policy rate (RATE) increase yields across all maturities in countries with ER anchor whereas only short-term yields react in IT countries. However, only in IT countries RATE responds to shocks in medium-term and short-term yields.

Date : 06/03/2015
Thesis Committee :

Supervisor: Giuseppe Bertola, EDHEC Business School

External reviewer: Marco Bonomo, Insper

Other committee member: René Garcia, EDHEC Business School

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