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Large-scale asset purchases by the Federal Reserve: did they work?

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Author Info

  • Joseph Gagnon
  • Matthew Raskin
  • Julie Remache
  • Brian Sack

Abstract

In this study, authors Joseph Gagnon, Matthew Raskin, Julie Remache and Brian Sack review the Federal Reserve’s experience with implementing the LSAPs between late 2008 and March 2010. They explain that the target fed funds rate was set as low as possible in December 2008. Thus, to further ease the stance of monetary policy as the economic outlook deteriorated, the central bank purchased substantial quantities of assets with medium and long maturities—housing agency debt, agency mortgage-backed securities (MBS) and Treasuries—to drive down private borrowing rates. ; Title of Special Issue: Federal Reserve Policy Responses to the Financial Crisis.

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Bibliographic Info

Article provided by Federal Reserve Bank of New York in its journal Economic Policy Review.

Volume (Year): (2011)
Issue (Month): May ()
Pages: 41-59

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Handle: RePEc:fip:fednep:y:2011:i:may:p:41-59:n:v.17no.1

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Related research

Keywords: Portfolio management ; Interest rates ; Risk ; Federal Reserve System ; Treasury bonds ; Investments ; Liquidity (Economics) ; Open market operations ; Federal Reserve Bank of New York ; Federal Open Market Committee ; Mortgage-backed securities ; Time-series analysis;

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References

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  1. Christopher J. Neely, 2010. "The large scale asset purchases had large international effects," Working Papers 2010-018, Federal Reserve Bank of St. Louis.
  2. Andrés, Javier & López-Salido, J David & Nelson, Edward, 2004. "Tobin's Imperfect Asset Substitution in Optimizing General Equilibrium," CEPR Discussion Papers 4336, C.E.P.R. Discussion Papers.
  3. Johannes C. Stroebel & John B. Taylor, 2009. "Estimated Impact of the Fed’s Mortgage-Backed Securities Purchase Program," NBER Working Papers 15626, National Bureau of Economic Research, Inc.
  4. Ben S. Bernanke & Vincent R. Reinhart & Brian P. Sack, 2004. "Monetary policy alternatives at the zero bound: an empirical assessment," Finance and Economics Discussion Series 2004-48, Board of Governors of the Federal Reserve System (U.S.).
  5. 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.
  6. Campbell, John Y & Viceira, Luis M, 2005. "The Term Structure of the Risk-Return Tradeoff," CEPR Discussion Papers 4914, C.E.P.R. Discussion Papers.
  7. Thomas Laubach, 2003. "New evidence on the interest rate effects of budget deficits and debt," Finance and Economics Discussion Series 2003-12, Board of Governors of the Federal Reserve System (U.S.).
  8. John Y. CAMPBELL & Luis VICEIRA, 1998. "Who Should Buy Long-Term Bonds?," FAME Research Paper Series rp5, International Center for Financial Asset Management and Engineering.
  9. Dimitri Vayanos & Jean-Luc Vila, 2009. "A Preferred-Habitat Model of the Term Structure of Interest Rates," NBER Working Papers 15487, National Bureau of Economic Research, Inc.
  10. N. Gregory Mankiw & Ricardo Reis & Justin Wolfers, 2003. "Disagreement about Inflation Expectations," Harvard Institute of Economic Research Working Papers 2011, Harvard - Institute of Economic Research.
  11. Greenwood, Robin & Vayanos, Dimitri, 2008. "Bond Supply and Excess Bond Returns," CEPR Discussion Papers 6694, C.E.P.R. Discussion Papers.
  12. Kenneth Kuttner, 2006. "Can Central Banks Target Bond Prices?," NBER Working Papers 12454, National Bureau of Economic Research, Inc.
  13. Frankel, Jeffrey A, 1985. "Portfolio Crowding-out, Empirically Estimated," The Quarterly Journal of Economics, MIT Press, vol. 100(5), pages 1041-65, Supp..
  14. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
  15. Franco Modigliani & Richard Sutch, 1967. "Debt Management and the Term Structure of Interest Rates: An Empirical Analysis of Recent Experience," Journal of Political Economy, University of Chicago Press, vol. 75, pages 569.
  16. Benjamin M. Friedman, 1981. "Debt Management Policy, Interest Rates, and Economic Activity," NBER Working Papers 0830, National Bureau of Economic Research, Inc.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The Federal Reserve's Maturity Extension Program and Treasury debt management
    by James Hamilton in Econbrowser on 2012-08-08 11:55:53
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