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, R&R Journal of Money, Credit and Banking
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) [New draft coming soon]
We develop a joint term structure model for zero-coupon yields and survey expectations that allows for biases both in perceived policy responses and in expectations of fundamentals. Using US data, we find evidence of both: reaction function errors at short maturities and probability forecast errors at long maturities. These biases have three main implications. First, term premia implied by surveys are systematically lower than those inferred from bond prices. Second, incorporating surveys helps recover subjective term premia. Third, not accounting for survey biases leads to a distorted view of the true dynamics of interest rates.
Predicting the COVID-19 epidemic: is a regional approach preferable? (with Fabrizio Iacone, Giancarlo Manzi and Silvia Salini)
TIPS Liquidity Premium and Quantitative Easing