Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of San Francisco
Working Paper Series
A Portfolio Model of Quantitative Easing
Jens H. E. Christensen
Signe Krogstrup
Abstract

This paper presents a portfolio model of asset price effects arising from central bank large-scale asset purchases, commonly known as quantitative easing (QE). Two financial frictions—segmentation of the market for central bank reserves and imperfect asset substitutability—give rise to two distinct portfolio effects. One derives from the reduced supply of the purchased assets. The other runs through banks’ portfolio responses to the created reserves and is independent of the assets purchased. The results imply that central bank reserve expansions can affect long-term bond prices even in the absence of long-term bond purchases.


Download Full text
Cite this item
Jens H. E. Christensen & Signe Krogstrup, A Portfolio Model of Quantitative Easing, Federal Reserve Bank of San Francisco, Working Paper Series 2016-12, 21 Jul 2016, revised 23 Aug 2017.
More from this series
JEL Classification:
Subject headings:
DOI: 10.24148/wp2016-12
For corrections, contact Federal Reserve Bank of San Francisco Research Library ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal