Yield curve control: Difference between revisions
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'''Yield Curve Control''' ('''YCC''') is a [[monetary policy]] action whereby a [[central bank]] purchases variable amounts of [[government bond]]s or other [[financial asset]]s in order to target interest rates at a certain level.<ref>{{Cite web|url=https://www.investopedia.com/what-is-yield-curve-control-4797189|title=Yield Curve Control|publisher=[[Investopedia]] }}</ref> It generally means buying bonds at a slower rate than would occur under a [[Quantitative Easing]] policy. For that reason, it can be thought of as a more effective form of QE: In QE the central bank buys bonds, but does not have a target for what interest rate those purchases will bring. In YCC, the central bank intentionally buys enough bonds to reach a certain interest rate target. |
'''Yield Curve Control''' ('''YCC''') is a [[monetary policy]] action whereby a [[central bank]] purchases variable amounts of [[government bond]]s or other [[financial asset]]s in order to target interest rates at a certain level.<ref>{{Cite web|url=https://www.investopedia.com/what-is-yield-curve-control-4797189|title=Yield Curve Control|publisher=[[Investopedia]] }}</ref> It generally means buying bonds at a slower rate than would occur under a [[Quantitative Easing]] policy. For that reason, it can be thought of as a more effective form of QE: In QE the central bank buys bonds, but does not have a target for what interest rate those purchases will bring. In YCC, the central bank intentionally buys enough bonds to reach a certain interest rate target. |
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Two examples of Yield Curve Control can be found in the United States after World War II, where bonds were purchased to fund the war effort, and in Japan, early 21st century, where bonds were purchased to keep long term interest rates at 0%, in an effort to stimulate the economy.<ref>{{Cite web|url=https://www.investopedia.com/what-is-yield-curve-control-4797189|title=Yield Curve Control|publisher=[[Investopedia]] }}</ref> |
Two examples of Yield Curve Control can be found in the United States after World War II<ref>{{Cite web|url=https://www.chicagofed.org/publications/economic-perspectives/2021/2|title=Yield Curve Control in the United States, 1942 to 1951|publisher=[[Chicago Federal Reserve]] }}</ref>, where bonds were purchased to fund the war effort, and in Japan, early 21st century<ref>{{Cite web|url=https://www.reuters.com/markets/rates-bonds/japan-set-keep-ultra-low-rates-doubts-over-yield-cap-grow-2022-12-19/|title=BOJ jolts markets in surprise change to yield curve policy|publisher=[[Reuters]] }}</ref>, where bonds were purchased to keep long term interest rates at 0%, in an effort to stimulate the economy.<ref>{{Cite web|url=https://www.investopedia.com/what-is-yield-curve-control-4797189|title=Yield Curve Control|publisher=[[Investopedia]] }}</ref> |
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== See Also == |
== See Also == |
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Revision as of 08:30, 21 December 2022
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Yield Curve Control (YCC) is a monetary policy action whereby a central bank purchases variable amounts of government bonds or other financial assets in order to target interest rates at a certain level.[1] It generally means buying bonds at a slower rate than would occur under a Quantitative Easing policy. For that reason, it can be thought of as a more effective form of QE: In QE the central bank buys bonds, but does not have a target for what interest rate those purchases will bring. In YCC, the central bank intentionally buys enough bonds to reach a certain interest rate target.
Two examples of Yield Curve Control can be found in the United States after World War II[2], where bonds were purchased to fund the war effort, and in Japan, early 21st century[3], where bonds were purchased to keep long term interest rates at 0%, in an effort to stimulate the economy.[4]