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Open-Ended Treasury Purchases: From Market Functioning to Financial Easing

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Abstract

We assess whether the Fed’s asset purchases can be tailored to either restore market functioning or provide economic stimulus. When the communicated goal is restoring market functioning and purchases’ implementation is flexible, flow effects are significant: relative price deviations narrow. However, stock effects remain near zero and hence not stimulative. When the communicated goal links purchases to the achievement of the dual mandate, improving their size’s predictability, stock effects rise consistently above zero. When the communicated implementation improves the predictability of the purchases’ maturity composition, stock effects become large. Jointly, the communicated goal and implementation can shape the purchases’ effects.

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  • Stefania D'Amico & Max Gillet & Sam Schulhofer-Wohl & Tim Seida, 2026. "Open-Ended Treasury Purchases: From Market Functioning to Financial Easing," Staff Reports 1183, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:102814
    DOI: 10.59576/sr.1183
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    Keywords

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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