Working Papers

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) 

We develop a joint shadow rate term structure model for zero-coupon yields and survey expectations that allows for departures between subjective and objective expectations, arising from biases both in perceived policy responses and in expectations of fundamentals. Using U.S. 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, not accounting for survey biases can distort inference about the dynamics of observed interest rates. Second, surveys are essential to recover the premium perceived by investors. Third, survey-implied term premia are systematically lower than those inferred from bond prices.

Permanent working papers