شگفتی های سیاست های پولی و بازار اوراق قرضه بین المللی

We examine the impact and spillover effects of monetary policy surprises on international bond returns. Within the framework of Campbell and Ammer (1993), we decompose international bond returns into news regarding future returns, real interest rates and future inflation for Germany, the U.K. and the U.S. We examine how excess bond returns in these three countries are affected by surprise changes in monetary policy in each country. Our measure of the unanticipated element of monetary policy is based on futures markets rather than the more traditional vector autoregression. Our results indicate that excess bond returns primarily react to domestic as compared to foreign monetary policy surprises. We also find there is a strong divergence between the effects of domestic monetary policy on excess bond returns in Germany relative to the U.K. A surprise monetary tightening in Germany (U.K.) leads to a rise (fall) in the excess holding period return. We trace this effect to news about lower (higher) inflation expectations and could be potentially rationalized by differences in the credibility of the monetary policy authority in each country.

The last decade has been witness to the primacy of monetary policy as the main tool used by policymakers in the stabilization of inflation and output. Concomitantly, commentators and analysts appear to pay close attention to changes in policy rates in the belief that such changes, particularly unexpected changes, can influence asset market returns. However, neither policymakers nor academics fully understand how monetary policy affects the economy. In recent years, an increasing amount of attention has been paid to the qualitative and quantitative impact of monetary policy changes on other asset prices such as interest rates and stock returns. For the U.S., the influence of monetary policy surprises on other interest rates is examined by Cook and Hahn, 1989, Poole and Rasche, 2000 and Kuttner, 2001 and Cochrane and Piazzesi (2002) while Bomfim, 2003, Rigobon and Sack, 2004 and Ehrmann and Fratzscher, 2004 and Bernanke and Kuttner (2005) all examine how U.S. policy rate changes affect the U.S. stock market. Bredin et al. (2007) document similar findings for the impact of U.K. monetary policy surprises on the U.K. stock market while Bredin et al. (2009) examine the influence of European monetary policy surprises on equity returns. Further, Wongswan (2009) documents a wide range of global markets react significantly to U.S. monetary policy announcements. With increasing globalization, asset markets appear to move more in tandem with each other. For example, Kim et al. (2005) find that linkages among European stock markets inside and outside the Euro area have strengthened following currency unification. Further, empirical evidence suggests that there are strong correlations between the major bond markets (Ilmanen, 1995) and that these correlations have increased dramatically in recent years (Solnik et al., 1996). There is also evidence of at least partial integration between major international bond markets (Barr and Priestley, 2004) while Driessen et al. (2003) identify common factors in predicting international bond returns. Additionally, Kim et al. (2006) perform a dynamic analysis of integration to try to capture the evolving nature of relationships between markets. They establish strong contemporaneous and dynamic linkages between Germany and other Euroland bond markets but that these links are much weaker and more stable for the U.K. and accession countries. Not surprisingly, recent research has begun to highlight the likely influence of global, regional and local influences on asset returns. For example, Christiansen, 2007 and Christiansen, forthcoming investigates the impact of global and regional spillovers in bond and equity markets and uncovers significant spillovers from both global (U.S.) and regional (E.U.) markets into domestic markets and that the introduction of the Euro has typically strengthened regional effects. While there has also been an increasing number of studies that examine the influence of both domestic and foreign news on domestic and foreign assets, e.g., Andersen et al., 2003, Becker et al., 1995 and Ehrmann et al., 2005, and Faust et al. (2007). It is within this context that we seek to investigate the international transmission of monetary policy in terms of its impact on international bond markets. The price of a bond is a function of the discounted stream of future coupon payments and the redemption value of the bond. Shiller and Beltratti (1992) and Campbell and Ammer (1993) advance an approach to decompose news regarding current excess bond returns into revisions in expectations of future excess returns, inflation and real rates.1 In this study, we focus on the German, U.K. and U.S. long-term bond markets and conduct a decomposition of each respective country's bond returns based on Campbell and Ammer (1993) decomposition while permitting returns in each country to affect one another. Given the pivotal role of monetary policy in determining bond returns we next seek to characterize the impact of unanticipated domestic and foreign monetary policy changes on each country's bond returns and its components. A natural question is how important are domestic monetary surprises in determining domestic bond returns and are there spillovers from foreign monetary policy to domestic returns? It is frequently argued that U.S. monetary policy drives world bond returns – our study seeks to shed light on this view. Related evidence suggests that German bond returns respond more to U.S. macro news than domestic or other Euro area news, see for example Goldberg and Leonard (2003) and Andersson et al. (2006). The reasons cited for such findings include greater financial market integration, the importance of the U.S. to global growth and the earlier release (relative to the Euro area) of U.S. macro announcements. While it is natural to assume that a surprise tightening in monetary policy would lead to higher long-term rates, Ellingsen and Söderström (2001) argue that the response of long rates to a surprise change in the policy rather is ambiguous. In particular, they suggest that long rates will rise when the change in monetary policy reveals information regarding the economy but if the monetary action reveals changes in the central bank's preferences then short rates and long rates may move in opposite directions. Thornton (1998) also argues that a tightening of monetary policy may lower inflation expectations. Bearing this in mind, a critical feature of our paper, in contrast to previous research that simply examines how long-term interest rates respond to monetary policy surprises (e.g., Kuttner, 2001, Rigobon and Sack, 2004 and Ehrmann and Fratzscher, 2005), is that we seek to delve further into what lies behind the response (if any) in bond returns, i.e. is the change in excess bond returns due to changes in expectations regarding future excess returns, real rates or inflation? Bernanke and Kuttner (2005) conduct a similar exercise in decomposing the impact of monetary policy surprises on U.S. stock returns and we follow their methodology here. Using futures market data to derive our measure of the monetary policy surprise, an important feature of our analysis is the decomposition of monetary policy changes into expected and unexpected changes.2 Failure to decompose monetary policy changes into its expected and unexpected components are likely to lead to biased results due to an errors in variables problem. Our key results show that excess bond returns react to domestic monetary policy surprises in both Germany and the U.K. but fail to have a significant impact in the U.S. over the period 1994–2004. Interestingly, we find a strong divergence between the effects of domestic policy on excess bond returns in Germany relative to the U.K. with a surprise monetary tightening in former (latter) leading to a rise (fall) in the excess holding period return. The rationale behind such contrasting responses becomes clearer when one breaks down news regarding excess bonds returns into its components, i.e. revisions in news regarding future excess returns, future real interest rates and future inflation, and assess how these components are affected by unanticipated monetary policy. In particular, a surprise tightening of monetary policy in Germany (U.K.) leads to a statistically significant revision in inflation expectations downwards (upwards) and this appears primarily responsible for the differing response of bond returns in each respective country. Such contrasting responses of inflation expectations to a tightening of monetary policy could be potentially rationalized by differences in the credibility of the monetary policy authority in respective countries (area). In particular, the Bundesbank has traditionally been viewed as a strong fighter of inflation while the Bank of England less so. Finally, we find little role for monetary policy spillovers, i.e. surprise changes in monetary policy in one country (area) does not appear to affect news regarding excess bond returns in other countries. The outline of the rest of the paper is as follows. In section 2, we discuss briefly issues regarding the identification of monetary policy, while in section 3 we outline the Campbell-Ammer methodology associated with the variance decomposition of excess bond returns, how we measure monetary policy surprises and how we seek to assess their impact on news regarding current excess bond returns and their respective components. In section 4, we discuss the data used and present the results from and analysis of the variance decomposition as well as the impact of monetary policy surprises. Finally section 5 provides some concluding remarks.

This paper examines the impact and possible spillovers effects of unanticipated monetary policy on international bond returns. Further, we decompose the response of bond returns to monetary policy surprises to delve deeper into the reasons behind such responses. We seek to assess the impact of surprise changes in monetary policy on revisions in expectations regarding excess bond returns and their constituent components for each country, enabling us to identify whether the response is due to revisions in expectations regarding future excess returns, future real interest rates or future inflation. The VAR model uncovers evidence of U.S. spillovers in both Germany and the U.K., with U.S. excess returns having a significant impact on German excess returns, German real short rates and both the U.K. and German spreads. However, somewhat surprisingly, when we investigate the effect of a U.S. monetary policy surprise there is no statistically significant impact on any of the three countries' excess bond returns or their individual components. This result contrasts with the widely-held belief that U.S. monetary policy has a strong influence on global bond returns. This suggests any impact is confined to high-frequency intra-day adjustments which cannot be uncovered at the daily frequency. Importantly, we demonstrate that there is a significant rise in German excess bond returns in response to a surprise domestic monetary tightening as future inflation expectations are revised significantly downwards. This potentially suggests a credible German (Euro area) monetary policy with a surprise tightening in the policy rate leading to lower inflation expectations. Conversely, we observe that a surprise tightening by the Bank of England has a significant negative effect on news regarding current excess bond returns in the U.K. It appears that an unanticipated monetary tightening in the U.K. leads to higher inflation expectations and hence declining excess returns. Our results for the U.K. are consistent for samples that focus purely on post Bank of England independence. Our results infer that the Bank of England has not yet been successful at establishing credibility in relation to fighting inflation.