The Original Operation Twist: The War Finance Corporation's War Bond Purchase, 1918-1920
AbstractIn 1918 the United States Treasury delegated to the War Finance Corporation, a newly-created off-budget federal agency, the task of buying Liberty and later victory bonds in an effort to stabilize prices. Bayesian vector autoregression analysis of the bond purchase indicate that the WFC purchase provided significant price support, and lowered bond yields while the program operated. Once WFC purchase ended, war bond yields increased substantially. However, since the war bond purchases were financed by the sale of short-term debt certificates, the bond purchases increased short rates while reducing long rates. The WFC’s bond purchases twisted the yield curve.
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Bibliographic InfoPaper provided by University of Delaware, Department of Economics in its series Working Papers with number 12-13.
Length: 44 pages
Date of creation: 2012
Date of revision:
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E43; N12; M22; N42; G12;
Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
- N42 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: 1913-
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-17 (All new papers)
- NEP-HIS-2012-11-17 (Business, Economic & Financial History)
- NEP-MAC-2012-11-17 (Macroeconomics)
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