Estimating the macroeconomic effects of the Fed’s asset purchases

Chung, Hess T.; Laforte, Jean-Philippe; Reifschneider, David L.; Williams, John C.

Journal Article

Estimating the macroeconomic effects of the Fed’s asset purchases

Abstract: An analysis shows that the Federal Reserve?s large-scale asset purchases have been effective at reducing the economic costs of the zero lower bound on interest rates. Model simulations indicate that, by 2012, the past and projected expansion of the Fed?s securities holdings since late 2008 will lower the unemployment rate by 1 percentage points relative to what it would have been absent the purchases. The asset purchases also have probably prevented the U.S. economy from falling into deflation.

Keywords: Monetary policy; Government securities; Interest rates; Macroeconomics - Econometric models;