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Heterogeneous Impact of Quantitative Easing on Government Bond Yields

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  • Mesut Turkay
  • Timur Han Gur

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.

Suggested Citation

  • Mesut Turkay & Timur Han Gur, 2019. "Heterogeneous Impact of Quantitative Easing on Government Bond Yields," Prague Economic Papers, Prague University of Economics and Business, vol. 2019(2), pages 178-195.
    • Handle: RePEc:prg:jnlpep:v:2019:y:2019:i:2:id:679:p:178-195
    DOI: 10.18267/j.pep.679
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    More about this item

    Keywords

    Unconventional monetary policy; Quantitative easing; Augmented Mean Group;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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