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International Economics and Economic Policy

, Volume 15, Issue 2, pp 353–371 | Cite as

Quantitative easing effects on commercial bank liability and government yields in UK: A threshold cointegration approach

  • Stephanos Papadamou
  • Eleftherios Spyromitros
  • Nikolaos A. Kyriazis
Original Paper
  • 143 Downloads

Abstract

During the recent financial crisis, the Bank of England has taken quantitative easing (QE) measures by buying public as well as private assets in order to strengthen the economy via liquidity injections. This paper investigates the dynamic relationship between unconventional policy measures reflected in central bank’s assets, and government versus commercial bank liability curves in a non-linear framework. By adopting a threshold cointegration methodology we provide evidence against linearity in gilt and commercial banks’ yield responses to asset purchase facility (APF) activity with policy rate being near the zero lower bound (ZLB). By estimating a momentum-TART model, evidence for a uni-directional long run causality from the Bank of England’s assets to both curves are present.

Keywords

Non-linear cointegration Quantitative easing Bank liabilities yields 

JEL classification

G1 E5 E4 

Notes

Acknowledgements

The authors would like to thank the editor and anonymous referees for useful remarks and the participants of the EEFS 2015 conference in Brussels for constructive comments in an earlier version of this paper.

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2017

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of ThessalyVolosGreece
  2. 2.Department of EconomicsDemocritus University of ThraceKomotiniGreece

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