U.S. Monetary Policy and International Bond Markets

This paper analyzes how U.S. monetary policy affects the pricing of dollar‐denominated sovereign debt. We document that yields on dollar‐denominated sovereign bonds are highly responsive to U.S. monetary policy surprises—during both the conventional and unconventional policy regimes—and that the passthrough of unconventional policy to foreign bond yields is, on balance, comparable to that of conventional policy. In addition, a conventional U.S. monetary easing (tightening) leads to a significant narrowing (widening) of credit spreads on sovereign bonds issued by countries with a speculative‐grade credit rating but has no effect on the corresponding weighted average of bilateral exchange rates for a basket of currencies from the same set of risky countries; this indicates that an unanticipated tightening of U.S. monetary policy widens credit spreads on risky sovereign debt directly through the financial channel, as opposed to indirectly through the exchange rate channel. During the unconventional policy regime, yields on both investment‐ and speculative‐grade sovereign bonds move one‐to‐one with policy‐induced fluctuations in yields on comparable U.S. Treasuries. We also examine whether the response of sovereign credit spreads to US monetary policy differs between policy easings and tightenings and find no evidence of such asymmetry.     

Injury prevention priority setting based on the National Injury Surveillance data in Korea

For the reduction of injury burden, injury prevention efforts are essential. However, financial, material and human resources are far from sufficient, and this situation necessitates setting priorities for effective injury prevention. Hence, the aim of this study is to prioritise 13 injury mechanisms for prevention of injury using four injury burden criteria. National death certificate, hospital discharge data and emergency data during 2004 were used. According to the 13 most frequent injury mechanisms (ICD-10), mortality priority score, years of potential life lost (YPLL) priority score, morbidity priority score and hospital charge priority score were calculated. Injury mechanisms which were ranked fourth or higher on at least three of the four criteria scores were arranged in rank orders. Traffic crashes ranked highest on all four of the priority criteria for injury prevention followed by fall and poisoning in second and third positions, respectively. Categorised by age groups, in 0-19 year olds, traffic crashes, suffocation and drowning; in 20-59 years, traffic crashes, suffocation and poisoning; and in 60 and over, traffic crashes and fall were shown to be significant injury prevention priority in rank orders. Injury prevention priorities identified from this study could be useful in strategically allocating limited resources and implementing more focused prevention policies in Korea.     

The Impact of the Federal Reserve's Large‐Scale Asset Purchase Programs on Corporate Credit Risk

Estimating the effect of Federal Reserve's announcements of Large‐Scale Asset Purchase (LSAP) programs on corporate credit risk is complicated by the simultaneity of policy decisions and movements in prices of risky financial assets, as well as by the fact that both interest rates of assets targeted by the programs and indicators of credit risk reacted to other common shocks during the recent financial crisis. This paper employs a heteroskedasticity‐based approach to estimate the structural coefficient measuring the sensitivity of market‐based indicators of corporate credit risk to declines in the benchmark market interest rates prompted by the LSAP announcements. The results indicate that the LSAP announcements led to a significant reduction in the cost of insuring against default risk—as measured by the CDX indexes—for both investment‐ and speculative‐grade corporate credits. While the unconventional policy measures employed by the Federal Reserve to stimulate the economy have substantially lowered the overall level of credit risk in the economy, the LSAP announcements appear to have had no measurable effect on credit risk in the financial intermediary sector.     

Credit Markets and the Propagation of Monetary Policy Shocks

This paper analyzes the propagation of monetary policy shocks through the creation of credit in an economy. Models of the monetary transmission mechanism typically feature responses that last for a few quarters contrary to what the empirical evidence suggests. To propagate the impact of monetary shocks over time, these models introduce adjustment costs by which agents find it optimal to change their decisions slowly. This paper presents another explanation that does not rely on any sort of adjustment costs or stickiness. In our economy, agents own assets and make occupational choices. Banks intermediate between agents demanding and supplying assets. Our interpretation is based on the way banks create credit and how the monetary authority affects the process of financial intermediation through its monetary policy. As the central bank lowers the interest rate by buying government bonds in exchange for reserves, high productive entrepreneurs are able to borrow more resources from low-productivity agents. We show that this movement of capital among agents sets in motion a response of the economy that resembles an expansionary phase of the cycle.