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A Preferred-Habitat Model of Term Premia, Exchange Rates, and Monetary Policy Spillovers / Pierre-Olivier Gourinchas, Walker D. Ray, Dimitri Vayanos.
- Format:
- Book
- Author/Creator:
- Gourinchas, Pierre-Olivier.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w29875.
- NBER working paper series no. w29875
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2022.
- Summary:
- We develop a two-country model in which currency and bond markets are populated by different investor clienteles, and segmentation is partly overcome by global arbitrageurs with limited capital. Our model accounts for the empirically documented violations of Uncovered Interest Parity (UIP) and the Expectations Hypothesis, and for how UIP violations depend on bond maturity, investment horizon, and yield curve slope differentials. Large-scale purchases of long-maturity bonds lower domestic and foreign bond yields, and depreciate the currency. Conventional monetary policy is transmitted to domestic and international bond yields as well, but its international transmission is weaker than for unconventional policy.
- Notes:
- Print version record
- March 2022.
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