Did Quantitative Easing Affect Interest Rates Outside the US? – New Evidence Based on Interest Rate Differentials

40 Pages Posted: 2 Feb 2016  

Ansgar Hubertus Belke

University of Duisburg-Essen - Department of Economics and Business Administration; IZA Institute of Labor Economics; Centre for European Policy Studies

Daniel Gros

Centre for European Policy Studies, Brussels; CESifo (Center for Economic Studies and Ifo Institute)

Thomas Ulrich Osowski

University of Duisburg-Essen

Multiple version iconThere are 2 versions of this paper

Date Written: December 15, 2015

Abstract

This paper explores the effects of non-standard monetary policies on international yield relationships. Based on a descriptive analysis of international long-term yields, we find evidence that long-term rates have followed a global downward trend prior to as well as during the financial crisis. Comparing interest rate developments in the United States and the Eurozone, it appears difficult to find a distinct impact of the Fed’s QE1 on US interest rates for which the global environment – the global downward trend in interest rates – does not account. Motivated by these results, we analyze the impact of the Fed’s QE1 program on the stability of the US-Euro long-term interest rate relationship by using a CVAR and, in particular, recursive estimation methods. Using data between 2002 and 2014, we find limited evidence that QE1 caused a breakup or a destabilization of the transatlantic interest rate relationship. Taking global interest rate developments into account, we thus find no significant evidence that QE had an independent, distinct impact on US interest rates.

Keywords: Quantitative easing; unconventional monetary policies; time series econometrics; Cointegrated VAR (CVAR); recursive methods

JEL Classification: C32, E43, E44, E58, F31, G01, G15

Suggested Citation

Belke, Ansgar Hubertus and Gros, Daniel and Osowski, Thomas Ulrich, Did Quantitative Easing Affect Interest Rates Outside the US? – New Evidence Based on Interest Rate Differentials (December 15, 2015). Ruhr Economic Paper No. 600. Available at SSRN: https://ssrn.com/abstract=2721712 or http://dx.doi.org/10.2139/ssrn.2721712

Ansgar Hubertus Belke (Contact Author)

University of Duisburg-Essen - Department of Economics and Business Administration ( email )

Universitätsstr. 9
Essen, 45141
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for European Policy Studies ( email )

1 Place du Congres, 1000
Brussels, 1000
Belgium

Daniel Gros

Centre for European Policy Studies, Brussels ( email )

1 Place du Congres
B-1000 Brussels, 1000
Belgium

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Thomas Ulrich Osowski

University of Duisburg-Essen ( email )

Lotharstrasse 1
Duisburg, 47048
Germany

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