Have Federal Reserve MBS purchases affected market functioning?
Beginning in October 2011, the Federal Reserve began ongoing purchases of Mortgage Backed Securities (MBS). I test the extent to which these purchases were associated with disruptions in indicators of market functioning by using daily data on Federal Reserve MBS purchase operations. I find that two separate proxies for market functioning show adverse responses to Federal Reserve purchases that appear to be most closely linked to the additional open-ended MBS purchase program announced in September 2012. However, the magnitude of the disruption in market functioning appears to be quite modest.
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- Hancock, Diana & Passmore, Wayne, 2011. "Did the Federal Reserve's MBS purchase program lower mortgage rates?," Journal of Monetary Economics, Elsevier, vol. 58(5), pages 498-514.
- Diana Hancock & Wayne Passmore, 2011. "Did the Federal Reserve's MBS purchase program lower mortgage rates?," Finance and Economics Discussion Series 2011-01, Board of Governors of the Federal Reserve System (U.S.).
- Christopher J. Neely, 2010. "The large scale asset purchases had large international effects," Working Papers 2010-018, Federal Reserve Bank of St. Louis.
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