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Unconventional Monetary Policy and Long‐Term Interest Rates

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  • TAO WU

Abstract

This paper constructs a survey‐based measure capturing the evolution of market's expectations of the Federal Reserve's Large‐Scale Asset Purchases (LSAP) program during 2008–18, and examines the transmission mechanism of unconventional monetary policy. Estimation results suggest that both signaling and portfolio balance channels of the LSAP were important in lowering long‐term interest rates; Moreover, the Federal Reserve's forward guidance policy had led to a gradual extension of market's projections of the duration of the LSAP, making its effects more persistent. Model estimation also explains the 2013 taper tantrum well, and suggests that the LSAP's effects might have declined during QE III.

Suggested Citation

  • Tao Wu, 2024. "Unconventional Monetary Policy and Long‐Term Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 56(8), pages 2061-2104, December.
    • Handle: RePEc:wly:jmoncb:v:56:y:2024:i:8:p:2061-2104
    DOI: 10.1111/jmcb.13111
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    References listed on IDEAS

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