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Federal Reserve Bank of San Francisco
FRBSF Economic Letter
Operation Twist and the effect of large-scale asset purchases
Titan Alon
Eric T. Swanson
Abstract

The Federal Reserve's current large-scale asset purchase program, dubbed "QE2," has a precedent in a 1961 initiative by the Kennedy Administration and the Federal Reserve known as "Operation Twist." An analysis finds that four of six potentially market-moving Operation Twist announcements had statistically significant effects and that the program cumulatively caused a significant but moderate 0.15 percentage point reduction in longer-term Treasury yields. These results can be used to estimate QE2's effects.


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Titan Alon & Eric T. Swanson, "Operation Twist and the effect of large-scale asset purchases" , Federal Reserve Bank of San Francisco, FRBSF Economic Letter, number 13, 2011.
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Keywords: Monetary policy ; Interest rates
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