Quantitative Easingand U.S. Financial Asset Returns
Abstract: . This paper is a comprehensive study of the unconventional monetary policy taken by the Federal Reserve since the financial crisis of 2008, specifically on the purchases of different assets by the Fed to change medium and long-term rates. Included in this study are the three rounds of quantitative easing, and the two rounds of Operation Twist. A study as such is needed in order to examine if the Fed’s purchases of these various long-term assets had any effect on the financial markets in the longer term perspective since the first announcement of the first round of purchase in November 2008. While there exists a variety of literature on the effects of quantitative easing on Treasuries and mortgage backed securities, there is no single study comprising of all the large scale asset purchases by the Fed, covering their effects on all major financial assets. This study is an attempt to fill this void in current literature on quantitative easing. Keywords. Unconventional Monetary Policy, Quantitative Easing, the Federal Reserve. JEL. E52, E58, G14.
"Quantitative Easingand U.S. Financi..." refers background in this paper
...Recent literature, i.e. Svensson (2001), Eggertsson & Woodford (2003), suggests that additional monetary stimulus such as quantitative easing can be introduced together with some form of commitment to the public to keep short-term interest rate low for a prolonged period of time, even after when…...
"Quantitative Easingand U.S. Financi..." refers background or methods in this paper
...Krishnamurthy and Vissing-Jorgensen (2011) remark on the identification issue for these five QE1 event dates that there is some uncertainty that the identified events are in fact the dominant events for the identified event day....
...For the announcement dates in QE1 and QE2, this paper uses the five dates selected by Krishnamurthy and Vissing-Jorgensen (2011), but also included other QE announcement dates from FOMC up to the most recent time....
...As such, besides running a baseline regression using the event dates from Krishnamurthy & Vissing-Jorgensen (2011), I also performed a robustness check, included all FOMC announcements regarding QE, not just the select, earlier ones that had more impact on the market....
...Krishnamurthy & Vissing-Jorgensen (2011) also raise the issue of omitted event dates and how that would affect their event study....
...Following Gagnon et al (2010) and Krishnamurthy & Vissing-Jorgensen (2011), this paper utilizes an event-study approach to examine the impact of all of the recent large-scale asset purchases based on announcements from the Fed of such purchases, spanning from the first announcement of QE1 on…...
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