Prague Economic Papers 2019, 28(2):178-195 | DOI: 10.18267/j.pep.679

Heterogeneous Impact of Quantitative Easing on Government Bond Yields

Mesut Turkay1,*, Timur Han Gur2
1 Undersecretariat of Treasury, Republic of Turkey, Ankara, Turkey (mesut.turkay@hazine.gov.tr)
2 Department of Economics, Hacettepe University, Ankara, Turkey (timurgur@hacettepe.edu.tr)

Interest rates in many advanced countries have reached zero lower bound and this has led to the widespread use of unconventional monetary policies after the global crisis. Hence, it has been more and more important to better understand the effects of these policies on major economic variables and the transmission mechanism through which they influence the economy. This study analyses the impact of quantitative easing (QE) policies on local currency government bond yield in emerging market (EM) economies in a heterogeneous panel setting. An Augmented Mean Group (AMG) estimator is used that allows for cross-sectional dependence and heterogeneous slopes. Model results show that government bond interest rates in EM economies are determined by country-specific factors such as central bank policy rate, inflation and budget deficit as well as external global factors such as US ten-year government bond yield and QE policies of advanced countries' central banks.

Keywords: Unconventional monetary policy, Quantitative easing, Augmented Mean Group
JEL classification: C23, E43, E52

Accepted: April 23, 2018; Published: April 1, 2019  Show citation

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Turkay, M., & Gur, T.H. (2019). Heterogeneous Impact of Quantitative Easing on Government Bond Yields. Prague Economic Papers, 28(2), 178-195. doi: 10.18267/j.pep.679
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