HETEROGENEOUS IMPACT OF QUANTITATIVE EASING ON GOVERNMENT BOND YIELDS


Turkay M., GÜR T. H.

PRAGUE ECONOMIC PAPERS, vol.28, no.2, pp.178-195, 2019 (Journal Indexed in SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 28 Issue: 2
  • Publication Date: 2019
  • Doi Number: 10.18267/j.pep.679
  • Title of Journal : PRAGUE ECONOMIC PAPERS
  • Page Numbers: pp.178-195

Abstract

Interest rates in many advanced countries have reached zero lower bound and this has led to the widespread use of unconventional monetary policies after the global crisis. Hence, it has been more and more important to better understand the effects of these policies on major economic variables and the transmission mechanism through which they influence the economy. This study analyses the impact of quantitative easing (QE) policies on local currency government bond yield in emerging market (EM) economies in a heterogeneous panel setting. An Augmented Mean Group (AMG) estimator is used that allows for cross-sectional dependence and heterogeneous slopes. Model results show that government bond interest rates in EM economies are determined by country-specific factors such as central bank policy rate, inflation and budget deficit as well as external global factors such as US ten-year government bond yield and QE policies of advanced countries' central banks.