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The Effects of Asset Purchases and Normalization of US Monetary Policy

Author

Listed:
  • Naoko Hara

    (Deputy Director and Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: naoko.hara@boj.or.jp))

  • Ryuzo Miyao

    (Professor, Faculty of Economics, University of Tokyo (E-mail: miyao@e.u-tokyo.ac.jp))

  • Tatsuyoshi Okimoto

    (Associate Professor, Crawford School of Public Policy, Australian National University, and Visiting Fellow, Research Institute of Economy, Trade and Industry (RIETI) (E-mail: tatsuyoshi. okimoto@anu.edu.au))

Abstract

This paper examines changes in the effects of unconventional monetary policies in the US. To this end, we estimate a Markov-switching VAR model with absorbing regimes to capture possible structural changes. Our results detect regime changes around the beginning of 2011 and the middle of 2013. Before 2011, the US large-scale asset purchases (LSAPs) had relatively large impacts on the real economy and prices, but after the middle of 2013, their effects were weaker and less-persistent. In addition, after the middle of 2013, which includes the monetary policy normalization period, the asset purchase (or balance sheet) shocks had slightly weaker effects than during the early stage of the LSAPs but stronger effects than during the late stage of the LSAPs, while interest rate shocks had insignificant effects on the real economy and prices. Finally, our results suggest that the positive responses of durables and capital goods expenditures to interest rate shocks weakened the negative impacts of interest rate hikes after the middle of 2013 including the period of monetary policy normalization.

Suggested Citation

  • Naoko Hara & Ryuzo Miyao & Tatsuyoshi Okimoto, 2019. "The Effects of Asset Purchases and Normalization of US Monetary Policy," IMES Discussion Paper Series 19-E-16, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:19-e-16
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    References listed on IDEAS

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    Cited by:

    1. Inoue, Tomoo & Okimoto, Tatsuyoshi, 2022. "International spillover effects of unconventional monetary policies of major central banks," International Review of Financial Analysis, Elsevier, vol. 79(C).
    2. Ryuzo Miyao & Tatsuyoshi Okimoto, 2020. "Regime shifts in the effects of Japan’s unconventional monetary policies," Manchester School, University of Manchester, vol. 88(6), pages 749-772, December.

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    More about this item

    Keywords

    Quantitative easing; Unconventional monetary policy; LSAP; MSVAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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