CXO

Unconventional Monetary Policy And The Great Recession - Estimating The Impact Of A Compression In The Yield Spread At The Zero Lower Bound

Date Added: Oct 2010
Format: PDF

The authors explore the macroeconomic impact of a compression in the long-term bond yield spread within the context of the Great Recession of 2007-2009 via a Bayesian time-varying parameter structural VAR. They identify a 'Pure' spread shock which, leaving the short-term rate unchanged by construction, allows them to characterise the macroeconomic impact of a compression in the yield spread induced by central banks' asset purchases within an environment in which the short rate cannot move because it is constrained by the zero lower bound.