US Monetary Policy Announcements and the Term Structure of Interest Rate Differentials: Evidence from Hong Kong and Singapore
Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 09/2005
Journal of International Money and Finance, 2009, 28(6): 920-940. The new title is “International Interest Rates and US Monetary Policy Announcements: Evidence from Hong Kong and Singapore
25 Pages Posted: 23 Aug 2007 Last revised: 8 Aug 2022
Date Written: May 1, 2005
Abstract
This working paper was written by Giorgio Valente (University of Warwick).
This paper investigates the effect of US monetary policy announcements on the term structure of US interest rate differentials with Hong Kong and Singapore. US monetary policy surprises on domestic and international interest rates are measured by using data from short-term interest rate futures markets in all three countries around the FOMC meetings dates. Our results, based on careful treatment of interest rate endogeneity and time-varying risk premia in the futures markets, document that US monetary policy announcements significantly affect the behavior of the term structure of interest rates in the US and in both Asian countries. The implications of these results in light of the expectations hypothesis of the term structure of interest rates (EHTS) are also discussed.
Keywords: Monetary policy, interest rate futures, term structure of interest rates
JEL Classification: E43, E44, E52, F31, G13.
Suggested Citation: Suggested Citation
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