Let's Twist Again: A High-Frequency Event-study Analysis of Operation Twist and Its Implications for QE2
AbstractThis paper undertakes a modern event-study analysis of Operation Twist and compares its effects to those that should be expected for the recent quantitative policy announced by the Federal Reserve, dubbed "QE2". We first show that Operation Twist and QE2 are similar in magnitude. We identify six significant, discrete announcements in the course of Operation Twist that potentially could have had a major effect on financial markets, and show that four did have statistically significant effects. The cumulative effect of these six announcements on longer-term Treasury yields is highly statistically significant but moderate, amounting to about 15 basis points. This estimate is consistent both with Modigliani and Sutchâs (1966) time series analysis and with the lower end of empirical estimates of Treasury supply effects in the literature.
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Bibliographic InfoArticle provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.
Volume (Year): 42 (2011)
Issue (Month): 1 (Spring) ()
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Operation Twist; QE2; financial markets; Treasury;
Other versions of this item:
- Eric T. Swanson, 2011. "Let’s twist again: a high-frequency event-study analysis of operation twist and its implications for QE2," Working Paper Series 2011-08, Federal Reserve Bank of San Francisco.
- Eric T. Swanson, 2011. "Let's Twist Again: A High-Frequency Event-Study Analysis of Operation Twist and Its Implications for QE2," 2011 Meeting Papers 982, Society for Economic Dynamics.
- QE2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - - - -
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