I analyze the recent experience of unconventional monetary policy in Sweden to study the interest rate transmission mechanisms of government bond purchases when interest rates are not constrained by a lower bound. Using dynamic term structure models and event study regressions I find that...

The links between real and nominal bond risk premia and macroeconomic dynamics are explored quantitatively in a model with nominal rigidities and monetary policy. The estimated model captures macroeconomic and yield curve properties of the U.S. economy, implying significantly positive real term...

The volatility patterns of overnight interest rates differ across industrial countries in ways that existing models, designed to replicate the features of the U.S. federal funds market, cannot explain. This paper presents an equilibrium model of the overnight interbank market that matches these...

We analyze optimal monetary policy and its implications for asset prices, when aggregate demand has inertia and responds to asset prices with a lag. If there is a negative output gap, the central bank optimally overshoots aggregate asset prices (asset prices are initially pushed above their...

We analyze the effect of monetary policy on yield spreads between corporate bonds with different credit ratings over the business cycle. We use futures contracts to distinguish between expected and unexpected changes in the Fed funds target rate and several indicators to distinguish between...

This paper examines the association between option-implied interest rate distributions and macroeconomic expectations in the context of a forward-looking monetary policy rule. We presume that market participants view the policy rule as a guide to the path of future policy rates and price...

This paper analyzes the joint dynamic processes of macroeconomic and monetary variables and bond yields in China. We show that macroeconomic variables as well as monetary policy variables have a significant impact on two factors that capture the variation in yields. An increase in the inflation...

This paper analyzes the effect of the interest rate lower bound on long term sovereign bond spreads in the Euro area. We specify a joint shadow rate term structure model for the risk-free, the German and the Italian sovereign yield curves. In our model, the behavior of long term spreads becomes...

Based on high-frequency data for Norway and Sweden, we investigate to what extent explicit forward guidance from monetary policy makers, by means of publishing the path of expected future policy rates, affects the market yield curve. We summarise movements in the yield curve by two latent...

This paper studies the effects of Federal Open Market Committee (FOMC) forward guidance language. I estimate two policy surprises at FOMC meetings: a change in the current federal funds rate and an orthogonal change in the expected path of the federal funds rate. From February 2000 to June 2003,...