Measuring the impact of unconventional monetary policies on the US banking and bond markets at the lower bound.

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Abstract

The effects of credit and monetary policy shocks are analyzed using a shadow rate model of the Euro-Dollar
and Treasury bond markets. This uses three factors common to both markets and two spread factors that capture
the term structure of the rate differential. The results show that the policy initiatives that followed the Lehman
default in 2008 were much more effective in restraining risk premiums in banking markets than in the Treasury
market and that, besides the shadow policy rate, the shadow Eurodollar rate is a useful indicator of the effect of
default risk on the economy.
Original languageEnglish
JournalJournal of Money Credit and Banking
Publication statusAccepted/In press - 2 Feb 2024

Bibliographical note

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Keywords

  • Term Structure, TED spread, Global Financial Crisis, Monetary Policy.

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