Fifty Shades of QE Revisited

Fabo, Jancokova, Kempf and Pastor (2021) use OLS regressions to show that central bankers report quantitatively larger effects of QE on output and inflation than academic researchers. They also show that central bankers are more likely to report economically/statistically significant results, advance faster in their careers and use more positive sentiment to describe their results. We reject the null hypothesis of a Gaussian distribution of the residuals in many of these specifications. We then repeat the analysis with regression estimators that are robust to a non-Gaussian residual distribution where this is feasible. We use the median (50% quantile) regression estimator and the MS regression estimator of Maronna and Yohai (2000). With these robust regression approaches, the null hypothesis that central bank and academic researchers report the same quantitative effect of QE on output and inflation cannot be rejected, with point estimates which are less than half as large. There is no evidence that the remaining results are affected by non-Gaussianity. In particular, the sentiment regressions, for which there is no evidence of non-Gaussianity, are robust to all of the estimators explored here.