Essays on Foreign Treasury Purchases and the Yield Curve

foreign Treasury purchases;yield curve;large scale asset purchases;sign identification;identification by heteroskedasticity;capital flows;Economics

Martin, Christopher AlanWright, Jonathan H. ;

Johns Hopkins University

关键词: foreign Treasury purchases;    yield curve;    large scale asset purchases;    sign identification;    identification by heteroskedasticity;    capital flows;    Economics;   

Others  :  https://jscholarship.library.jhu.edu/bitstream/handle/1774.2/37137/MARTIN-DISSERTATION-2014.pdf?sequence=1&isAllowed=y

瑞士|英语

来源: JOHNS HOPKINS DSpace Repository

【 摘 要 】

A growing literature finds that large purchases of US Treasury debt by foreign investors lower Treasury yields.However, this literature does not adequately address the endogeneity of foreign Treasury purchases to yields.The first two chapters of this dissertation overcome this identification problem with two different methods and therefore identify larger impacts of purchases than previous studies.The third chapter improves the measurement of foreign Treasury purchases.In the first chapter, I analyze the dynamic impacts of foreign Treasury purchases on yields in the context of a sign-identified vector autoregression.In the baseline results, a surprise foreign purchase of $100 billion of US Treasury securities significantly lowers all yields for approximately two years.The largest impacts occur after about one year, with yields lower by 70 to 100 basis points.Additionally, I decompose long rates, revealing that the Federal Reserve acts to lessen the impact of foreign purchases, but not enough to offset large declines in term premia.My estimated effects of purchases on yields are generally larger than those found elsewhere and indicate both that foreign Treasury purchases explain the period of low rates in the 2000s and that LSAPs have substantial impacts on yields.The second chapter uses a novel measure of surprise foreign official Treasury purchases, high frequency data, and the technique of identification by heteroskedasticity to identify the effect of Chinese official purchases of US Treasury securities on yields.The effects I estimate are statistically significant and on the same order of magnitude as the lower frequency findings in the first chapter of the dissertation.In the third chapter, I address shortcomings in the existing data on cross-border Treasury flows. Sources of raw data are noisy, inconsistent, and available only at lower frequencies, while existing techniques for improving this data use a limited information set.I estimate a new measure of net foreign Treasury flows as an unobserved state variable using the Kalman filter, with raw flows data, yields, and exchange rates as observables.The resulting time series of net flows addresses the above shortcomings and highlights several instances where existing data sources were misleading.