Across the borders, above the bounds: a non-linear framework for international yield curves (with Iryna Kaminska and Sergio Pastorello) Bank of England - Staff Working Paper No. 1,062
This paper presents a non-linear framework to evaluate spillovers across domestic and international yield curves when policy rates are constrained by the zero lower bound. Based on the sample of US and UK data, we estimate a joint shadow rate model of international yield curves, accounting for the zero lower bound, no-arbitrage conditions within and between government bond markets, and the global nature of some of the bond risk factors. Results indicate that the post-2009 US monetary policy transmission mechanism and its spillover effects on the UK yield curve are non-linear and asymmetric.
Information in (and not in) interest rate surveys (with Adam Golinski)
We show that standard term structure models for observed interest rates fail to capture interest rate survey expectations. We therefore propose a joint term structure model for observed interest rates and interest rate surveys that allows for separate objective and subjective probability measures. Our results contradict the previous term structure literature and provide evidence that interest rate surveys do not help identify observed interest rate dynamics. Yet, despite this evidence against the rational expectation hypothesis, we find that surveys provide valuable information as a priced risk factor that is not spanned by observed interest rates. [slides]
Predicting the COVID-19 epidemic: is a regional approach preferable? (with Fabrizio Iacone, Giancarlo Manzi and Silvia Salini)
TIPS Liquidity Premium and Quantitative Easing