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Are Unconventional Monetary Policies Effective?

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  • Urszula Szczerbowicz

    (LUISS "Guido Carli" University)

Abstract

This paper evaluates the impact of unconventional and conventional monetary policies in the U.S. on the Libor-OIS spread, long-term interest rates and long-term inflation expectations. To this purpose we investigate the behavior of selected asset yields on the days of monetary policy announcements. We find that liquidity facilities other than TAF reduced the three-month Libor-OIS spread. The QE1 purchases of longer-term Treasury securities and agency debt/MBS lowered long-term interest rates. Furthermore, we find evidence that the Fed's rescue operations and QE2 raised long-term inflation expectations. Our results show that QE1 and QE2 had different effects: QE1 reduced long-term interest rates without raising inflation expectations, whereas QE2 raised inflation expectations and did not lower long-term interest rates. We also consider the impact of fiscal policy announcements. We find that the government bailouts reduced the three-month Libor-OIS spread while the fiscal stimulus announcements raised long-term inflation expectations.

Suggested Citation

  • Urszula Szczerbowicz, 2011. "Are Unconventional Monetary Policies Effective?," Working Papers CELEG 1107, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    • Handle: RePEc:lui:celegw:1107
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    Cited by:

    1. Christopher Martin & Costas Milas, 2012. "Quantitative easing: a sceptical survey," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 28(4), pages 750-764, WINTER.
    2. Urszula Szczerbowicz, 2015. "The ECB Unconventional Monetary Policies: Have They Lowered Market Borrowing Costs for Banks and Governments?," International Journal of Central Banking, International Journal of Central Banking, vol. 11(4), pages 91-127, December.
    3. Hande Küçük & Pinar Özlü & İsmaİl Anil Talaslı & Deren Ünalmış & Canan Yüksel, 2016. "Interest Rate Corridor, Liquidity Management, And The Overnight Spread," Contemporary Economic Policy, Western Economic Association International, vol. 34(4), pages 746-761, October.
    4. Sunil Kumar & Anand Prakash & Krishna M. Kushawaha, 2017. "What Explains Call Money Rate Spread in India?," Working Papers id:11975, eSocialSciences.
    5. Marek Belka & Jens Thomsen & Kim Abildgren & Pietro Catte & Pietro Cova & Patrizio Pagano & Ignazio Visco & Petar Chobanov & Amine Lahiani & Nikolay Nenovsky & Cristina Badarau & Grégory Levieuge & To, 2011. "Monetary Policy after the Crisis," SUERF Studies, SUERF - The European Money and Finance Forum, number 2011/3 edited by Ernest Gnan, & Ryszard Kokoszczynski & Tomasz Lyziak & Robert McCauley, May.
    6. Mr. Shaun K. Roache & Mrs. Marina V Rousset, 2013. "Unconventional Monetary Policy and Asset Price Risk," IMF Working Papers 2013/190, International Monetary Fund.
    7. Landais, Bernard, 2012. "Reformulation du modèle macroéconomique de la nouvelle synthèse : crédits, politique monétaire et écarts de taux [A reformulation of the new synthesis macroeconomic model : credits, monetary policy," MPRA Paper 38665, University Library of Munich, Germany.

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    More about this item

    Keywords

    unconventional monetary policy; inflation expectations; long-term interest rates; Libor-OIS spread; announcements effect.;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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

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