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U.S. monetary policy surprises: identification with shifts and rotations in the term structure


Claus, E and Dungey, M, U.S. monetary policy surprises: identification with shifts and rotations in the term structure, Journal of Money, Credit and Banking, 44, (7) pp. 1443-1453. ISSN 0022-2879 (2012) [Refereed Article]

Copyright Statement

Copyright 2012 The Ohio State University

DOI: doi:10.1111/j.1538-4616.2012.00539.x


We develop a model to extract measures of monetary policy surprises from the maturity structure of the yield curve. The model endogenously allows for the fact that the yield curve may either shift or rotate in response to monetary policy shocks. A latent factor model approach with identification through heteroskedasticity harnesses the term structure to extract monetary policy shocks. The approach offers informational advantages over event studies. Results from the U.S. term structure from 1994 strongly support the hypothesis that differing term structure responses are reactions to different types of monetary policy shock, rather than differing reactions to the same policy shock.

Item Details

Item Type:Refereed Article
Keywords:monetary policy shocks, term structure, latent factor model
Research Division:Economics
Research Group:Applied economics
Research Field:Macroeconomics (incl. monetary and fiscal theory)
Objective Division:Economic Framework
Objective Group:Macroeconomics
Objective Field:Monetary policy
UTAS Author:Dungey, M (Professor Mardi Dungey)
ID Code:80559
Year Published:2012
Funding Support:Australian Research Council (DP0984994)
Web of Science® Times Cited:6
Deposited By:Economics and Finance
Deposited On:2012-11-02
Last Modified:2014-12-20

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