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Working Paper
Cheap Talk and the Efficacy of the ECB’s Securities Market Programme: Did Bond Purchases Matter?
In 2010, in response to an ever-worsening fiscal crisis, the ECB began purchasing sovereign debt from troubled euro-area countries through its Securities Market Programme (SMP). This program was designed to improve market functioning and restore the monetary transmission mechanism within the euro area. This paper does not test those ideals. Rather, we test whether SMP purchases systematically lowered peripheral yields and spreads. We find limited evidence of purchase effects but large announcement effects. In addition, on days in which the ECB was believed to have made large purchases, yields ...
Working Paper
Gauging the Ability of the FOMC to Respond to Future Recessions
Current forecasts suggest that the federal funds rate in the future is likely to level out at a rather low level by historical standards. If so, then the FOMC will have less ability than in the past to cut short-term interest rates in response to a future recession, suggesting a risk that economic downturns could turn out to be more severe as a result. However, simulations of the FRB/US model of a severe recession suggest that large-scale asset purchases and forward guidance about the future path of the federal funds rate should be able to provide enough additional accommodation to fully ...
Speech
The U.S. economic outlook and the implications for monetary policy: remarks at Money Marketeers of New York University, New York City
Remarks at Money Marketeers of New York University, New York City.
Speech
Implementing monetary policy with the balance sheet: keynote remarks for ECB Workshop: Money Markets, Monetary Policy Implementation, and Central Bank Balance Sheets, Frankfurt am Main, Germany
Keynote Remarks for ECB Workshop: Money Markets, Monetary Policy Implementation, and Central Bank Balance Sheets, Frankfurt am Main, Germany.
Speech
Panel remarks at Bank Indonesia–Federal Reserve Bank of New York Joint International Seminar, Bali Indonesia
Remarks at Bank Indonesia?Federal Reserve Bank of New York Joint International Seminar, Bali Indonesia.
Discussion Paper
How Do the Fed's MBS Purchases Affect Credit Allocation?
It is sometimes said that the Federal Reserve should not engage in “credit allocation.” But what does credit allocation actually mean? And how do current Fed policies affect the allocation of credit? In this post, we describe two separate ideas often associated with credit allocation. The first idea is that the Fed should not take credit risk, which taxpayers would ultimately have to bear. The second idea is that the Fed’s actions should not influence the flow of credit to particular sectors. We consider whether the Fed’s holdings of agency mortgage-backed securities (MBS) could ...
Journal Article
Breaking the ice: government interventions in frozen markets
When subprime mortgage defaults started mounting in 2007, financial institutions found themselves unable to profitably sell off these soured investments or raise new equity. As these institutions struggled to reduce their leverage, consumers and firms alike found it increasingly difficult to borrow, which helped trigger a deep recession. Within the context of two popular explanations for the freeze ? asymmetric information and debt overhang ? Benjamin Lester discusses the costs and benefits of policies aimed at thawing markets in a crisis, including direct asset purchases, equity injections, ...