Estimated Impact of the Federal Reserve’s Mortgage-Backed Securities Purchase Program
AbstractThe largest credit or liquidity program created by the Federal Reserve during the financial crisis was the mortgagebacked securities (MBS) purchase program. In this paper, we examine the quantitative impact of this program on mortgage interest rate spreads. This is more difficult than frequently perceived because of simultaneous changes in prepayment risk and default risk. Our empirical results attribute a sizable portion of the decline in mortgage rates to such risks and a relatively small and uncertain portion to the program. For specifications where the existence or announcement of the program appears to have lowered spreads, we find no separate effect of the stock of MBS purchased by the Federal Reserve.
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Bibliographic InfoArticle provided by International Journal of Central Banking in its journal International Journal of Central Banking.
Volume (Year): 8 (2012)
Issue (Month): 2 (June)
Find related papers by JEL classification:
- 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
- G01 - Financial Economics - - General - - - Financial Crises
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- Aït-Sahalia, Yacine & Andritzky, Jochen & Jobst, Andreas & Nowak, Sylwia & Tamirisa, Natalia, 2012.
"Market response to policy initiatives during the global financial crisis,"
Journal of International Economics,
Elsevier, vol. 87(1), pages 162-177.
- Yacine Aït-Sahalia & Jochen Andritzky & Andreas Jobst & Sylwia Nowak & Natalia Tamirisa, 2010. "Market Response to Policy Initiatives during the Global Financial Crisis," NBER Working Papers 15809, National Bureau of Economic Research, Inc.
- Lo Duca, Marco & Nicoletti, Giulio & Vidal Martinez, Ariadna, 2014. "Global corporate bond issuance: what role for US quantitative easing?," Working Paper Series 1649, European Central Bank.
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