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An Evaluation of Event-Study Evidence on the Effectiveness of the FOMC’s LSAP Program: Are the Announcement Effects Identified?

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  • Thornton, Daniel L.

    (Federal Reserve Bank of St. Louis)

Abstract

The consensus in monetary policy circles that the Fed’s large-scale asset purchases, known as quantitative easing (QE), have significantly reduced long-term yields is due in part to event studies, which show that long-term yields decline on QE announcement days. However, little attention has been given to whether these announcement effects are identified. This paper contributes to the literature by investigating whether announcement effects associated with the QE announcements used in the literature are identified. The analysis shows that none of announcement effects satisfy the strict requirements for identification. At best, event-studies provide modest evidence that QE reduces long-term yields.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2013-033.

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Length: 47 pages
Date of creation: 2013
Date of revision: 11 Mar 2014
Handle: RePEc:fip:fedlwp:2013-033

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  1. Michael D. Bauer & Glenn D. Rudebusch, 2011. "The signaling channel for Federal Reserve bond purchases," Working Paper Series 2011-21, Federal Reserve Bank of San Francisco.
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