IDEAS home Printed from https://ideas.repec.org/a/eee/jmacro/v52y2017icp56-74.html
   My bibliography  Save this article

Effectiveness of QE: An assessment of event-study evidence

Author

Listed:
  • Thornton, Daniel L.

Abstract

Event-studies are widely used to investigate the effectiveness of quantitative easing (QE) and the announcement effects found in this literature are widely cited as evidence that QE significantly reduced long-term yields. However, these announcement effects can be considered evidence of the effectiveness of QE in reducing long-term yields only if the announcement effects are due solely to QE news and are statistically significantly. This paper contributes to the literature by investigating whether announcement effects reported in the QE event-study literature meet this evidentiary standard.

Suggested Citation

  • Thornton, Daniel L., 2017. "Effectiveness of QE: An assessment of event-study evidence," Journal of Macroeconomics, Elsevier, vol. 52(C), pages 56-74.
    • Handle: RePEc:eee:jmacro:v:52:y:2017:i:c:p:56-74
    DOI: 10.1016/j.jmacro.2017.03.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0164070417300939
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jmacro.2017.03.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dimitri Vayanos & Jean‐Luc Vila, 2021. "A Preferred‐Habitat Model of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 89(1), pages 77-112, January.
    2. Jonathan H. Wright, 2012. "What does Monetary Policy do to Long‐term Interest Rates at the Zero Lower Bound?," Economic Journal, Royal Economic Society, vol. 122(564), pages 447-466, November.
    3. Daniel L. Thornton, 2014. "QE: is there a portfolio balance effect?," Review, Federal Reserve Bank of St. Louis, vol. 96(1), pages 55-72.
    4. Matthew Raskin, 2013. "The effects of the Federal Reserve's date-based forward guidance," Finance and Economics Discussion Series 2013-37, Board of Governors of the Federal Reserve System (U.S.).
    5. Joseph Gagnon & Matthew Raskin & Julie Remache & Brian Sack, 2011. "The Financial Market Effects of the Federal Reserve's Large-Scale Asset Purchases," International Journal of Central Banking, International Journal of Central Banking, vol. 7(1), pages 3-43, March.
    6. Michael Woodford, 2001. "Monetary policy in the information economy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 297-370.
    7. Joyce, Michael & Lasaosa, Ana & Stevens , Ibrahim & Tong, Matthew, 2010. "The financial market impact of quantitative easing," Bank of England working papers 393, Bank of England.
    8. Eric T. Swanson, 2011. "Let's Twist Again: A High-Frequency Event-study Analysis of Operation Twist and Its Implications for QE2," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 151-207.
    9. Michael Woodford, 2012. "Methods of policy accommodation at the interest-rate lower bound," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 185-288.
    10. Michael D. Bauer & Glenn D. Rudebusch, 2014. "The Signaling Channel for Federal Reserve Bond Purchases," International Journal of Central Banking, International Journal of Central Banking, vol. 10(3), pages 233-289, September.
    11. Daniel L. Thornton, 2011. "The effectiveness of unconventional monetary policy: the term auction facility," Review, Federal Reserve Bank of St. Louis, vol. 93(Nov), pages 439-454.
    12. Daniel L. Thornton, 2010. "Monetary policy and longer-term rates: an opportunity for greater transparency," Economic Synopses, Federal Reserve Bank of St. Louis.
    13. Ben S. Bernanke, 2012. "Opening remarks: monetary policy since the onset of the crisis," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 1-22.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mahmut Çelik & Ayla Oğuş Binatlı, 2022. "How Effective Are Macroprudential Policy Instruments? Evidence from Turkey," Economies, MDPI, vol. 10(4), pages 1-17, March.
    2. Hetzel, Robert, 2021. "The Recovery from the Great Recession: Did the FOMC Learn the Right Lessons?," Working Papers 10958, George Mason University, Mercatus Center.
    3. Christian Pfister & Jean-Guillaume Sahuc, 2020. "Unconventional monetary policies: A stock-taking exercise," Revue d'économie politique, Dalloz, vol. 130(2), pages 137-169.
    4. Gang Wang, 2019. "The Effects of Quantitative Easing Announcements on the Mortgage Market: An Event Study Approach," IJFS, MDPI, vol. 7(1), pages 1-30, February.
    5. Robert Hetzel, 2021. "The Recovery from the Great Recession: Did the FOMC Learn the Right Lessons?," Working Papers 3125, George Mason University, Mercatus Center.
    6. Dr. Enzo Rossi & Vincent Wolff, 2020. "Spillovers to exchange rates from monetary and macroeconomic communications events," Working Papers 2020-18, Swiss National Bank.
    7. Beck, Roland & Duca, Ioana A. & Stracca, Livio, 2019. "Medium term treatment and side effects of quantitative easing: international evidence," Working Paper Series 2229, European Central Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guidolin, Massimo & Orlov, Alexei G. & Pedio, Manuela, 2017. "The impact of monetary policy on corporate bonds under regime shifts," Journal of Banking & Finance, Elsevier, vol. 80(C), pages 176-202.
    2. King, Thomas B., 2019. "Expectation and duration at the effective lower bound," Journal of Financial Economics, Elsevier, vol. 134(3), pages 736-760.
    3. Swanson, Eric T., 2021. "Measuring the effects of federal reserve forward guidance and asset purchases on financial markets," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 32-53.
    4. Daniel L. Thornton, 2012. "Evidence on the portfolio balance channel of quantitative easing," Working Papers 2012-015, Federal Reserve Bank of St. Louis.
    5. José Dorich & Nicholas Labelle St-Pierre & Vadym Lepetyuk & Rhys R. Mendes, 2018. "Could a higher inflation target enhance macroeconomic stability?," Canadian Journal of Economics, Canadian Economics Association, vol. 51(3), pages 1029-1055, August.
    6. Smith, A. Lee & Valcarcel, Victor J., 2023. "The financial market effects of unwinding the Federal Reserve’s balance sheet," Journal of Economic Dynamics and Control, Elsevier, vol. 146(C).
    7. Carlo Rosa, 2012. "How "unconventional" are large-scale asset purchases? The impact of monetary policy on asset prices," Staff Reports 560, Federal Reserve Bank of New York.
    8. Moumita Paul & Kalluru Siva Reddy, 2022. "US QE and the Indian Bond Market," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(1), pages 137-157, March.
    9. Abdoulaye Millogo, 2020. "Hysteresis Effects and Macroeconomics Gains from Unconventional Monetary Policies Stabilization," Cahiers de recherche 20-12, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    10. Kaoru Hosono & Shogo Isobe, 2014. "The Financial Market Impact of Unconventional Monetary Policies in the U.S., the U.K., the Eurozone, and Japan," Discussion papers ron259, Policy Research Institute, Ministry of Finance Japan.
    11. Canlin Li & Min Wei, 2013. "Term Structure Modeling with Supply Factors and the Federal Reserve's Large-Scale Asset Purchase Progarms," International Journal of Central Banking, International Journal of Central Banking, vol. 9(1), pages 3-39, March.
    12. Neely, Christopher J., 2015. "Unconventional monetary policy had large international effects," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 101-111.
    13. Song, Zhaogang & Zhu, Haoxiang, 2018. "Quantitative easing auctions of Treasury bonds," Journal of Financial Economics, Elsevier, vol. 128(1), pages 103-124.
    14. Lemke, Wolfgang & Werner, Thomas, 2020. "Dissecting long-term Bund yields in the run-up to the ECB’s public sector purchase programme," Journal of Banking & Finance, Elsevier, vol. 111(C).
    15. Eric M. Engen & Thomas Laubach & David L. Reifschneider, 2015. "The Macroeconomic Effects of the Federal Reserve's Unconventional Monetary Policies," Finance and Economics Discussion Series 2015-5, Board of Governors of the Federal Reserve System (U.S.).
    16. Simon Gilchrist & Vivian Z. Yue & Egon Zakrajšek, 2016. "The Response of Sovereign Bond Yields to U.S. Monetary Policy," Central Banking, Analysis, and Economic Policies Book Series, in: Elías Albagli & Diego Saravia & Michael Woodford (ed.),Monetary Policy through Asset Markets: Lessons from Unconventional Measures and Implications for an Integrated World, edition 1, volume 24, chapter 8, pages 257-283, Central Bank of Chile.
    17. Bernhard, Severin & Ebner, Till, 2017. "Cross-border spillover effects of unconventional monetary policies on Swiss asset prices," Journal of International Money and Finance, Elsevier, vol. 75(C), pages 109-127.
    18. Daniel L. Thornton, 2012. "The Federal Reserve’s response to the financial crisis: what it did and what it should have done," Working Papers 2012-050, Federal Reserve Bank of St. Louis.
    19. Eser, Fabian & Schwaab, Bernd, 2016. "Evaluating the impact of unconventional monetary policy measures: Empirical evidence from the ECB׳s Securities Markets Programme," Journal of Financial Economics, Elsevier, vol. 119(1), pages 147-167.
    20. Sophocles N. Brissimis & Evangelia A. Georgiou, 2022. "The effects of Federal Reserve's quantitative easing and balance sheet normalization policies on long-term interest rates," Working Papers 299, Bank of Greece.

    More about this item

    Keywords

    Quantitative easing; Large-scale asset purchases; FOMC; Event studies; Announcement effect;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:52:y:2017:i:c:p:56-74. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622617 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.