Further investigations into the term structure of interest rates

Howell, Michael J. (2018) Further investigations into the term structure of interest rates. Doctoral thesis, Birkbeck, University of London.

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Abstract

Recent empirical term structure literature questions the usefulness of the standard three-parameter yield curve model in the wake of the Global Financial Crisis and the widespread adoption of unconventional monetary policies, such as Large-scale Asset Purchases (LSAP). This thesis builds on these concerns by extracting a new parameter from the term structure that measures the position of the traditional hump in the yield curve along the maturity axis. My alternative decomposition of the term structure makes it easier to track-down the influence of quantities on interest rates. Given that Treasuries are held as safe assets by many investor types, I interpret the new parameter as a gauge of investors’ risk appetite. It is time-varying and pro-cyclical, leading the business cycle and indexes of financial stress by several months and forming part of the risk-taking policy transmission channel. My results contradict the widely-held view from event studies that LSAP reduce long-term Treasury yields. They can also explain the often divergent relative movements between Treasury term premia and the premia on risky assets, such as corporate credits.

Item Type: Thesis (Doctoral)
Copyright Holders: The copyright of this thesis rests with the author, who asserts his/her right to be known as such according to the Copyright Designs and Patents Act 1988. No dealing with the thesis contrary to the copyright or moral rights of the author is permitted.
School/Department: School of Business, Economics & Informatics > Economics, Mathematics & Statistics
Depositing User: ORBIT Editor
Date Deposited: 25 Jan 2018 13:37
Last Modified: 25 Jan 2018 13:37
URI: http://bbktheses.da.ulcc.ac.uk/id/eprint/301

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