We assess the impact of large-scale asset purchases, commonly known as quantitative easing (QE), conducted by Sveriges Riksbank and the European Central Bank (ECB) on bond risk premia in the Swedish government bond market. Using a novel arbitrage-free dynamic term structure model of nominal and...

In this paper I study the effects of monetary policy on economic activity and asset prices in Sweden, separately identifying the effects of a conventional policy change from effects of new information about economic fundamentals. Recent research has shown that high-frequency changes in policy...

Holston, Laubach and Williams' (2017) estimates of the natural rate of interest are driven by the downward trending behaviour of 'other factor' z(t). I show that their implementation of Stock and Watson's (1998) Median Unbiased Estimation (MUE) to determine the size of parameter λ(z) which...

This paper presents a theoretical model of the term structure of interest rates based on the monetary policy decision-making process at modern central banks. Evaluations of explicit expressions for the spot and forward rate curve render several important results: (i) Spot and forward rates are...

In a simple dynamic macroeconomic model, it is shown that uncertainty about structural parameters does not necessarily lead to more cautious monetary policy, refining the accepted wisdom concerning the effects of parameter uncertainty on optimal policy. In particular, when there is uncertainty...

We use a quantitative model of the U.S. economy to analyze the response of long-term interest rates to monetary policy, and compare the model results with empirical evidence. We find that the strong and time-varying yield curve response to monetary policy innovations found in the data can be...

It has been suggested that interest-rate smoothing may be partly explained by an omitted variable that relates to conditions in financial markets. We propose an alternative interpretation that suggests that it relates to measurement errors in the output gap.

Asymmetric information between the central bank and bond markets creates an inference problem that affects the behaviour of long interest rates. This paper employs a simple macroeconomic model with a time-varying infation target to illustrate the implications of asymmetry for the sensitivity of...

We investigate, theoretically and empirically, the relationship between monetary policy and the term structure of interest rates. In particular, we show in a dynamic macroeconomic model that if monetary policy reveals information about economic developments, interest rates of all maturities move...

We construct and make available a new monetary policy event study database with high-frequency financial market reactions to Riksbank communications, spanning a period of 20 years. Using these data as instruments, we estimate the macroeconomic effects of monetary policy shocks in Sweden. A...