Quantitative Easing, Financial Market Frictions, and the Liquidity Theory of Yield Curves
2017/07/25
研討會日期 : 2017-07-25
時間 : 14:30
主講人 : Prof. Chien-Chiang Wang (王建強)
主持人 : Professor Hsuan-Chih Lin
地點 : Conference Room B110
演講者簡介 : Professor Wang received his Ph.D. from the Washington University in St. Louis in 2017. He is an assistant Professor of National Taiwan University. His research interests include Monetary Economics, Macroeconomics, Banking and Finance.
演講摘要 : I propose a liquidity theory of yield curves to analyze the impact of quantitative easing, especially its influence on the yield curve and the inflation rate at the zero lower bound. In the model, a term premium originates from the endogenous difference in liquidity between securities of varying maturities, and the difference is generated by financial market frictions. Financial market frictions cause liquidation risk and reinvestment risk for holding assets, and households with different characteristics make different assessments of the two risks. Accordingly, different households require different term premia and endogenously participate in markets for different maturities. The market term premium only reflects the term premium for the marginal trader. When the short-term interest rate reaches the zero lower bound, there may exist traders who demand smaller term premia and are willing to pay higher prices for the long-term securities. Thus, central banks’ purchases of long-maturity securities can decrease long-term interest rates and the term premium, and the effectiveness of the policy is determined by the degree of diversity in households’ term premia demand. Moreover, central banks’ long-term security purchases decrease inflation at the zero lower bound. These two effects together result in a distinct policy implication: quantitative easing shifts down the real yield curve at the long-maturity end but shifts it up at the short-maturity end if the households are sufficiently diverse in the term premia they require.
