However, due to the level of financial development, cultural norms, and degree of independence of the central banks in the region, modifications in the design of APPs to assure the maximal degree of effectiveness were common. [...] The variables of interest are: (1) the yield on the most liquid, long-term government security as discerned by volume of transactions; (2) the bid-ask spread of that security; and (3) the yield curve slope, the term spread, as measured by the difference between the 10-year maturity bond and the short-term security used most often in the country to conduct policy. [...] The dotted lines in the charts below signify the interquartile range — that is, plus and minus the difference between the first and third quartiles of the distribution of changes across the underlying countries in the sample. [...] The panel regression utilises a “fixed effect” model to accommodate the differences across countries that may not be captured by their domestic policy rates and exchange rates.9 The announcement day is represented by a dummy variable taking on the value of ‘1’ for the day following the announcement to account for a late-day announcement and the time for the market to digest the news. [...] 5.5 Impact on FX Volatility Although the panel regression model suggests that the inclusion of FX rates matter for isolating the impact of APPs on yields (in that the coefficient on the local currency vis- à-vis the US dollar is positive and statistically significant), a closer look at the impact of the announcement of the APP and the volatility of FX rates is mixed.
- Pages
- 74
- Published in
- Malaysia
