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Large-scale asset purchases by the Federal Reserve: did they work?

  • Joseph E. Gagnon
  • Matthew Raskin
  • Julie Remache
  • Brian P. Sack

In this study, authors Joseph Gagnon, Matthew Raskin, Julie Remache and Brian Sack review the Federal Reserve’s experience with implementing the LSAPs between late 2008 and March 2010. They explain that the target fed funds rate was set as low as possible in December 2008. Thus, to further ease the stance of monetary policy as the economic outlook deteriorated, the central bank purchased substantial quantities of assets with medium and long maturities—housing agency debt, agency mortgage-backed securities (MBS) and Treasuries—to drive down private borrowing rates. ; Title of Special Issue: Federal Reserve Policy Responses to the Financial Crisis.

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Article provided by Federal Reserve Bank of New York in its journal Economic Policy Review.

Volume (Year): (2011)
Issue (Month): May ()
Pages: 41-59

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Handle: RePEc:fip:fednep:y:2011:i:may:p:41-59:n:v.17no.1
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  1. Robin Greenwood & Dimitri Vayanos, 2008. "Bond Supply and Excess Bond Returns," NBER Working Papers 13806, National Bureau of Economic Research, Inc.
  2. Ben S. Bernanke & Vincent R. Reinhart & Brian P. Sack, 2004. "Monetary Policy Alternatives at the Zero Bound: An Empirical Assessment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2), pages 1-100.
  3. Jeffrey A. Frankel, 1985. "Portfolio Crowding-Out, Empirically Estimated," The Quarterly Journal of Economics, Oxford University Press, vol. 100(Supplemen), pages 1041-1065.
  4. Johannes C. Stroebel & John B. Taylor, 2009. "Estimated Impact of the Fed's Mortgage-Backed Securities Purchase Program," NBER Working Papers 15626, National Bureau of Economic Research, Inc.
  5. LuisM. Viceira & John Y. Campbell, 2001. "Who Should Buy Long-Term Bonds?," American Economic Review, American Economic Association, vol. 91(1), pages 99-127, March.
  6. Dimitri Vayanos & Jean-Luc Vila, 2009. "A preferred-habitat model of the term structure of interest rates," LSE Research Online Documents on Economics 29308, London School of Economics and Political Science, LSE Library.
  7. Javier Andres & J. David López-Salido & Edward Nelson, 2004. "Tobin's imperfect asset substitution in optimizing general equilibrium," Working Papers 2004-003, Federal Reserve Bank of St. Louis.
  8. Eric T. Swanson, 2011. "Let's Twist Again: A High-Frequency Event-study Analysis of Operation Twist and Its Implications for QE2," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 151-207.
  9. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
  10. Francis E. Warnock & Veronica C. Warnock, 2005. "International Capital Flows and U.S. Interest Rates," The Institute for International Integration Studies Discussion Paper Series iiisdp103, IIIS.
  11. N. Gregory Mankiw & Ricardo Augusto Marc Rocha Reis & Justin Wolfers, 2004. "Disagreement about Inflation Expectations," Yale School of Management Working Papers ysm391, Yale School of Management.
  12. John Y. Campbell & Luis Viceira, 2005. "The Term Structure of the Risk-Return Tradeoff," NBER Working Papers 11119, National Bureau of Economic Research, Inc.
  13. Thomas Laubach, 2003. "New evidence on the interest rate effects of budget deficits and debt," Finance and Economics Discussion Series 2003-12, Board of Governors of the Federal Reserve System (U.S.).
  14. Franco Modigliani & Richard Sutch, 1967. "Debt Management and the Term Structure of Interest Rates: An Empirical Analysis of Recent Experience," Journal of Political Economy, University of Chicago Press, vol. 75, pages 569.
  15. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," Review of Economic Studies, Oxford University Press, vol. 25(2), pages 65-86.
  16. Benjamin M. Friedman, 1981. "Debt Management Policy, Interest Rates, and Economic Activity," NBER Working Papers 0830, National Bureau of Economic Research, Inc.
  17. Christopher J. Neely, 2010. "The large scale asset purchases had large international effects," Working Papers 2010-018, Federal Reserve Bank of St. Louis.
  18. Kenneth Kuttner, 2006. "Can Central Banks Target Bond Prices?," NBER Working Papers 12454, National Bureau of Economic Research, Inc.
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