Template-type: ReDIF-Paper 1.0
Author-Name: Massimo Guidolin
Author-Name: Manuela Pedio
Title:Does the Cost of Private Debt Respond to Monetary Policy? Heteroskedasticity-Based Identification in a Model with Regimes
Abstract:We investigate the effects of a conventional monetary expansion, the quantitative easing, and maturity extension programs on the yields of corporate bonds. We adopt a multiple-regime VAR identification based on heteroskedasticity. An impulse response function analysis shows that a traditional, rate based expansionary policy leads to an increase in yields. The response to quantitative easing is instead a general and persistent decrease, in particular for long-term bonds. The responses generated by the maturity extension program are significant and of larger magnitude. A decomposition shows that the unconventional programs reduce the cost private debt primarily through a reduction in risk premia.
Classification-JEL: G12, C32, G14
Keywords:unconventional monetary policy; transmission channels; heteroskedasticity; vector autoregressions; identification; corporate bond yields.
Length: 45
Number: 19118
Creation-Date: 2019
File-URL: https://repec.unibocconi.it/baffic/baf/papers/cbafwp19118.pdf
File-Format: application/pdf
File-Size: 1182
Handle: RePEc:baf:cbafwp:cbafwp19118