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The Effect of the Federal Reserve’s Securities Holdings on Longer-term Interest Rates

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  • Brian Bonis
  • Jane E. Ihrig
  • Min Wei

Abstract

In an effort to promote more accommodative financial conditions following the financial crisis of 2008 and the ensuing recession, and at a time when the conventional monetary policy tool--the federal funds rate--was at its effective lower bound, the Federal Reserve conducted large-scale asset purchases (LSAPs) and a maturity extension program (MEP). This note outlines a way to estimate by how much Federal Reserve securities holdings resulting from these purchase programs reduce longer-term interest rates. In this note, we focus on another channel through which LSAPs may affect the economy: the portfolio balance channel.

Suggested Citation

  • Brian Bonis & Jane E. Ihrig & Min Wei, 2017. "The Effect of the Federal Reserve’s Securities Holdings on Longer-term Interest Rates," FEDS Notes 2017-04-20-1, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfn:2017-04-20-1
    DOI: 10.17016/2380-7172.1977
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    File URL: https://www.federalreserve.gov/econres/notes/feds-notes/effect-of-the-federal-reserves-securities-holdings-on-longer-term-interest-rates-20170420.htm
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    Cited by:

    1. Edward Gamber & John Seliski, 2019. "The Effect of Government Debt on Interest Rates: Working Paper 2019-01," Working Papers 55018, Congressional Budget Office.
    2. repec:cnb:ocpubc:geo2019/5 is not listed on IDEAS

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