Browsing by Author "Nguyen, Ngoc Thinh"

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The impact of quantitative easing on the volatility of US and European corporate bond markets: A cross-country analysis
(2018) Nguyen, Ngoc Thinh
School of Business | Bachelor's thesis
Objectives This paper seeks to first and foremost evaluate the nuances that differentiate quantitative easing (QE), as employed in the last financial crisis, from conventional monetary policies, with updates for the recent round of QE by the European Central Bank (ECB). Such differences then facilitate an investigation of whether QE by the Federal Reserve System and the ECB reduced volatility of domestic and international corporate bonds. We simultaneously assess potential transmission channels that could explain how any of the discovered effects transpired. Summary A review of literature and central bank data reveals technical intricacies of QE and interest rate targeting, and of US and Europe QE. The popular volatility modelling framework EGARCH, enhanced with exogenous variables to capture QE effects, is applied to broad-based Bloomberg US and European corporate bond indices. Conclusions QE is potent in reversing bond market turbulence that the 2008 financial crisis left in its wake, both on domestic and cross-border scales, consistent with the signaling channel. The portfolio balancing channel is evident for US QE only, and both asset purchase intensity and policy announcement are found to be ineffectual in reducing volatility, at least under this model specification.