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What are the macroeconomic effects of asset purchases?

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  • Weale, Martin
  • Wieladek, Tomasz

Abstract

We examine the impact of large scale asset purchase announcements of government bonds on real GDP and the CPI in the United Kingdom and the United States with a Bayesian VAR, estimated on monthly data from 2009M3 to 2014M5. We identify an asset purchase announcement shock with four different identification schemes, always leaving the reactions of real GDP and CPI unrestricted, to test whether these variables react to asset purchases. We then explore the transmission channels of this policy. The results suggest that an asset purchase announcement of 1% of GDP leads to a statistically significant rise of .58% (.25%) and .62% (.32%) rise in real GDP and CPI for the US (UK). In the US, this policy is transmitted through the portfolio balance channel and a reduction in household uncertainty. In the UK, the policy seems to be mainly transmitted through the impact on investors’ risk appetite and household uncertainty.

Suggested Citation

  • Weale, Martin & Wieladek, Tomasz, 2015. "What are the macroeconomic effects of asset purchases?," CEPR Discussion Papers 10495, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10495
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    Cited by:

    1. Fritz Breuss, 2016. "The Crisis Management of the ECB," WIFO Working Papers 507, WIFO.
    2. Hachula, Michael & Rieth, Malte & Piffer, Michele, 2016. "Unconventional Monetary Policy, Fiscal Side Effects and Euro Area (Im)balances," Annual Conference 2016 (Augsburg): Demographic Change 145790, Verein für Socialpolitik / German Economic Association.
    3. Haldane, Andrew & Roberts-Sklar, Matt & Wieladek, Tomasz & Young, Chris, 2016. "QE: the story so far," CEPR Discussion Papers 11691, C.E.P.R. Discussion Papers.
    4. Alan Blinder & Michael Ehrmann & Jakob de Haan & David-Jan Jansen, 2017. "Necessity as the mother of invention: monetary policy after the crisis," Economic Policy, CEPR;CES;MSH, vol. 32(92), pages 707-755.
    5. Arteta, Carlos & Kose, Ayhan & Stocker, Marc & Taskin, Temel, 2016. "Negative Interest Rate Policies: Sources and Implications," CEPR Discussion Papers 11433, C.E.P.R. Discussion Papers.
    6. Andrew Filardo & Jouchi Nakajima, 2018. "Effectiveness of unconventional monetary policies in a low interest rate environment," BIS Working Papers 691, Bank for International Settlements.
    7. Bhattarai, Saroj & Neely, Christopher J., 2016. "A Survey of the Empirical Literature on U.S. Unconventional Monetary Policy," Working Papers 2016-21, Federal Reserve Bank of St. Louis.
    8. repec:kuk:journl:v:50:y:2017:i:4:p:455-488 is not listed on IDEAS
    9. Bundick, Brent & Herriford, Trenton & Smith, Andrew Lee, 2017. "Forward Guidance, Monetary Policy Uncertainty, and the Term Premium," Research Working Paper RWP 17-7, Federal Reserve Bank of Kansas City.
    10. repec:rba:rbaacv:acv2017-04 is not listed on IDEAS
    11. Matthias Neuenkirch, 2016. "An Unconventional Approach to Evaluate the Bank of England's Asset Purchase Program," Research Papers in Economics 2016-11, University of Trier, Department of Economics.
    12. Garcia Pascual, Antonio & Wieladek, Tomasz, 2016. "The European Central Bank's QE: A new hope," CEPR Discussion Papers 11309, C.E.P.R. Discussion Papers.
    13. Philip Bunn & Paul Mizen & Pawel Smietanka, 2018. "Growing pension deficits and the expenditure decisions of UK companies," Discussion Papers 2018/05, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    14. Wildmer Daniel Gregori & Wildmer Agnese Sacchi, 2016. "Has the Grexit news spilled over into euro area financial markets? The role of domestic political leaders, supranational executives and institutions," Mo.Fi.R. Working Papers 134, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    15. Henning Hesse & Boris Hofmann & James Weber, 2017. "The macroeconomic effects of asset purchases revisited," BIS Working Papers 680, Bank for International Settlements.
    16. Boubaker, Sabri & Gounopoulos, Dimitrios & Nguyen, Duc Khuong & Paltalidis, Nikos, 2017. "Assessing the effects of unconventional monetary policy and low interest rates on pension fund risk incentives," Journal of Banking & Finance, Elsevier, vol. 77(C), pages 35-52.
    17. Claudio Borio & Anna Zabai, 2016. "Unconventional monetary policies: a re-appraisal," BIS Working Papers 570, Bank for International Settlements.
    18. repec:eee:finana:v:52:y:2017:i:c:p:281-291 is not listed on IDEAS
    19. Claudio Borio & Boris Hofmann, 2017. "Is Monetary Policy Less Effective When Interest Rates Are Persistently Low?," RBA Annual Conference Volume,in: Jonathan Hambur & John Simon (ed.), Monetary Policy and Financial Stability in a World of Low Interest Rates Reserve Bank of Australia.
    20. Petr Korab, 2016. "Access to Credit and Unconventional Monetary policy in the Eurozone after the Financial Crisis," MENDELU Working Papers in Business and Economics 2016-68, Mendel University in Brno, Faculty of Business and Economics.
    21. repec:oup:oxford:v:34:y:2018:i:1-2:p:269-286. is not listed on IDEAS
    22. Boubaker, Sabri & Gounopoulos, Dimitrios & Nguyen, Duc Khuong & Paltalidis, Nikos, 2015. "Assessing the effects of unconventional monetary policy on pension funds risk incentives," MPRA Paper 73398, University Library of Munich, Germany, revised Aug 2016.
    23. Jakob de Haan & Marco Hoeberichts & Renske Maas & Federica Teppa, 2016. "Inflation in the euro area and why it matters," DNB Occasional Studies 1403, Netherlands Central Bank, Research Department.

    More about this item

    Keywords

    Bayesian VAR; unconventional monetary policy;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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