By the same authors

TIPS Liquidity Premium and Quantitative Easing

Research output: Working paperDiscussion paper

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Publication details

DatePublished - Oct 2015
PublisherDepartment of Economics and Related Studies, University of York
Number of pages32
Original languageEnglish

Publication series

NameEdit Discussion Paper in Economics
No.23
Volume15

Abstract

In the context of a state-space model for nominal and TIPS yields, we identify the liquidity premium in the TIPS market as the common component in TIPS yields unspanned by nominal yields. Using daily US yields, we find that the TIPS liquidity premium explains up to 22% of the variation in TIPS yields and that it sharply spiked during the recent financial crisis. A counterfactual exercise shows that the QE2 program had only limited effects on the liquidity premium in the TIPS market.

    Research areas

  • TIPS, Quantitative Easing, Liquidity Premium, Factor models

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