Liquidity Effects of Quantitative Easing on Long-Term Interest Rates
AbstractThis paper argues that the expansion in reserves following recent quantitative easing programs of the Federal Reserve may have affected long-term interest rates through liquidity effects. The data lends some support for liquidity effects, in that reserves were negatively correlated with long-term yields at the zero lower bound. Estimates suggest that between January 2009 and 2011, 10-year US Treasury yields fell 46-85 basis points as a result of liquidity effects. The liquidity effect is separate from the portfolio balance effect of the change in the public supply of Treasury bonds, which is estimated to have reduced yields by another 20 basis points during that period.
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Bibliographic InfoPaper provided by Swiss National Bank in its series Working Papers with number 2012-02.
Length: 38 pages
Date of creation: 2012
Date of revision:
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More information through EDIRC
Quantitative Easing; Reserves; Liquidity Effect; Long-Term Interest Rates; Zero Lower Bound; Monetary Policy; Portfolio Balance;
Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-02 (All new papers)
- NEP-CBA-2012-05-02 (Central Banking)
- NEP-MAC-2012-05-02 (Macroeconomics)
- NEP-MON-2012-05-02 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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