Treasuries variance decomposition and the impact of monetary policy

Kontonikas, A., Nolan, C. , Zekaite, Z. and Lamla, M. (2019) Treasuries variance decomposition and the impact of monetary policy. International Journal of Finance and Economics, 24(48-50), pp. 1506-1519. (doi: 10.1002/ijfe.1744)

Abstract

This paper investigates the effect of monetary policy shifts on Treasuries over the last three decades. We decompose unexpected excess returns on 2‐, 5‐, and 10‐year Treasuries in three components related to revisions in expectations (news) about future excess returns, inflation, and real interest rates. We evaluate the impact of conventional and unconventional monetary policy shocks on returns and their components. Our results indicate that expansionary monetary policy shocks are associated with declining inflation expectations and higher Treasuries' returns.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: ZEKAITE, ZIVILE and Nolan, Professor Charles and Kontonikas, Professor Alexandros
• Authors: Kontonikas, A., Nolan, C., Zekaite, Z., and Lamla, M.
• College/School: College of Social Sciences > Adam Smith Business School > Accounting and Finance; College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: International Journal of Finance and Economics
• Publisher: Wiley
• ISSN: 1076-9307
• ISSN (Online): 1099-1158
• Published Online: 29 July 2019
• Copyright Holders: Copyright © 2019 John Wiley and Sons, Ltd
• First Published: First published in International Journal of Finance and Economics 24(4):1506-1519
• Publisher Policy: Reproduced in accordance with the copyright policy of the publisher