An evaluation of event-study evidence on the effectiveness of the FOMC’s LSAP program: the reasonable person standard
AbstractThere is a consensus in monetary policy circles that the Federal Reserve’s large-scale asset purchases, known as quantitative easing (QE), have significantly reduced long-term yields. The consensus is due in part to event studies, which show that long-term yields decline on QE announcement days. The quality of the event-study evidence depends critically on whether these announcement effects are identified. This paper undertakes a detailed analysis of the identification of the QE announcement effects using three bond yields and the announcements used in the literature. Because identification using the event-study methodology typically involves some judgment, the analysis relies on the reasonable person standard, which the U.S. Supreme Court recently broadened to include questions such as “are the QE announcement effects identified?”
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Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2013-033.
Date of creation: 2013
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- 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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