It is important for monetary policy makers to know how closely money market rates follow the policy rates they set. This paper looks at the volatility and persistence of divergences between short-term market interest rates away from policy rates. This may also offer insights into the...

Implied probability density functions (PDFs) estimated from cross-sections of observed option prices are gaining increasing attention amongst academics and practitioners. To date, however, little attention has been paid to the robustness of these estimates or to the confidence that users can...

The statistics that summarise probability density functions(pdfs) implied from option prices can be used to assess market expectations about future uncertainty, asymmetry and the probability of extreme movements in asset prices. A time-series analysis of these statistics for equity index and...

An economy is in a liquidity trap when monetary policy cannot influence either real or nominal variables of interest. A necessary condition for this is that the short nominal interest rate is constrained by its lower bound, typically zero. The paper develops a small analytical model to show how...

This paper estimates yield curve models for the United Kingdom, where the underlying determinants have a macroeconomic interpretation. The first factor is an unobserved inflation target, the second factor is annual inflation, and the third factor is a ‘Taylor rule residual’, which, among...

This paper investigates the information contained in the yields of corporate debt securities using a structural credit risk model. As previous studies have found, credit risk is not the only factor that affects corporate yield spreads. The aim is to decompose credit spreads, using a structural...

A large theoretical literature exists that suggests that differences in growth performance may be related to variations in the extent of international openness. This paper is concerned with quantifying measures of openness and examining their association with productivity growth across 19...

There is a live debate about the role of house prices in the transmission mechanism of monetary policy. Do house prices merely reflect macroeconomic conditions, or are there important feedback effects from house prices to other economic variables? A general equilibrium model is considered, where...

There is a strong partial correlation between openness and rates of productivity growth across UK manufacturing sectors. The paper investigates the relationship more formally, within a theoretical model of productivity catch-up. The model identifies three potential effects of international...

This paper is a detailed study of trading patterns in the gilt market - based on all transactions in three gilts (6% Treasury 1999, 9 1/2% Treasury 2005, and 2 1/2% Index-linked 2016) from October 1993 to October 1994. The main finding of the paper is that order flow in the gilt market does not...