Laura Coroneo (University of York) - TIPS Liquidity Premium and Quantitative Easing

This week's speaker will be Laura Coroneo, Lecturer at the University of York. Her research interests are: Econometrics, Empirical Finance & Macro-Finance. 

Title - TIPS Liquidity Premium and Quantitative Easing

Abstract - In the context of a state-space model for nominal and TIPS yields, we identify the liquidity premium in the TIPS market as the common component in TIPS yields unspanned by nominal yields. Using daily US yields, we find that the TIPS liquidity premium explains up to 22% of the variation in TIPS yields and that it sharply spiked during the recent financial crisis. A counterfactual exercise shows that the QE2 program had only limited effects on the liquidity premium in the TIPS market.

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