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The estimated macroeconomic effects of the Federal Reserve's large-scale Treasury purchase program

Author

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  • Jeffrey C. Fuhrer
  • Giovanni P. Olivei

Abstract

This brief examines an issue of current importance to the conduct of U.S. economic policy: how has the Federal Open Market Committee (FOMC) plan to purchase up to $600 billion of Treasury securities by June 30, 2011 affected the movement of inflation, GDP, and employment to more desirable medium-term and long-term levels? Following the FOMC's announcement of the plan on November 3, 2010, other events that potentially influence Treasury yields have been at play. To estimate the effects that the FOMC Treasury purchases may have on the goal of achieving more desirable levels of inflation and employment, the authors make use of different models to gauge the likely effect upon interest rates, the interest rate effects on real spending (GDP), and how changes in GDP may be affecting the employment rate.

Suggested Citation

  • Jeffrey C. Fuhrer & Giovanni P. Olivei, 2011. "The estimated macroeconomic effects of the Federal Reserve's large-scale Treasury purchase program," Public Policy Brief, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbpb:y:2011:n:11-2
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    References listed on IDEAS

    as
    1. Eric Rosengren, 2010. "Five questions about current monetary policy," Speech 40, Federal Reserve Bank of Boston.
    2. James D. Hamilton & Jing Cynthia Wu, 2012. "The Effectiveness of Alternative Monetary Policy Tools in a Zero Lower Bound Environment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(s1), pages 3-46, February.
    3. Joseph E. Gagnon & Matthew Raskin & Julie Remache & Brian P. Sack, 2011. "Large-scale asset purchases by the Federal Reserve: did they work?," Economic Policy Review, Federal Reserve Bank of New York, vol. 17(May), pages 41-59.
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    Cited by:

    1. Fabo, Brian & Jančoková, Martina & Kempf, Elisabeth & Pástor, Ľuboš, 2021. "Fifty shades of QE: Comparing findings of central bankers and academics," Journal of Monetary Economics, Elsevier, vol. 120(C), pages 1-20.
    2. Matthieu Darracq Paries, 2018. "Financial frictions and monetary policy conduct," Erudite Ph.D Dissertations, Erudite, number ph18-01 edited by Ferhat Mihoubi, February.
    3. Janet L. Yellen, 2011. "Improving the international monetary and financial system : a speech at the Banque de France International Symposium, Paris, France, March 4, 2011," Speech 565, Board of Governors of the Federal Reserve System (U.S.).
    4. Fabo, Brian & Jančoková, Martina & Kempf, Elisabeth & Pástor, Ľuboš, 2024. "Fifty shades of QE: Robust evidence," Journal of Banking & Finance, Elsevier, vol. 159(C).
    5. Hartmann, Philipp & Smets, Frank, 2018. "The first twenty years of the European Central Bank: monetary policy," Working Paper Series 2219, European Central Bank.
    6. Ben S. Bernanke, 2012. "Monetary Policy since the Onset of the Crisis : a speech at the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming, August 31, 2012," Speech 645, Board of Governors of the Federal Reserve System (U.S.).
    7. 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.
    8. Darracq Pariès, Matthieu & Papadopoulou, Niki X., 2020. "On the credit and exchange rate channels of central bank asset purchases in a monetary union," Economic Modelling, Elsevier, vol. 91(C), pages 502-533.
    9. Mamaysky, Harry, 2018. "The time horizon of price responses to quantitative easing," Journal of Banking & Finance, Elsevier, vol. 90(C), pages 32-49.
    10. Kimura Takeshi & Nakajima Jouchi, 2016. "Identifying conventional and unconventional monetary policy shocks: a latent threshold approach," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(1), pages 277-300, January.
    11. Fuhrer, Jeff, 2017. "Expectations as a source of macroeconomic persistence: Evidence from survey expectations in a dynamic macro model," Journal of Monetary Economics, Elsevier, vol. 86(C), pages 22-35.
    12. Jeffrey C. Fuhrer, 2012. "Real expectations: replacing rational expectations with survey expectations in dynamic macro models," Working Papers 12-19, Federal Reserve Bank of Boston.
    13. Ben S. Bernanke, 2014. "The Federal Reserve: Looking Back, Looking Forward : a speech at the Annual Meeting of the American Economic Association, Philadelphia, Pennsylvania, January 3, 2014," Speech 792, Board of Governors of the Federal Reserve System (U.S.).
    14. Paulo José Saraiva & Luiz Fernando De Paula & André De Melo Modenesi, 2016. "A Crise Financeira Americana E As Implicações Para A Política Monetária," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 114, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    15. Wenbin Wu, 2018. "The Credit Channel at the Zero Lower Bound through the Lens of Equity Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(2-3), pages 435-448, March.
    16. Matthieu Darracq-Pariès & Niki Papadopoulou, 2020. "Balance Sheet Policies in a Large Currency Union: A Primer on ECB Non-Standard Measures since 2014," Revue d'économie politique, Dalloz, vol. 130(2), pages 171-230.
    17. van Holle, Frederiek, 2017. "Essays in empirical finance and monetary policy," Other publications TiSEM 30d11a4b-7bc9-4c81-ad24-5, Tilburg University, School of Economics and Management.
    18. 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.

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