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Keywords:qe 

Journal Article
Time to Unwind

This fall, the Fed is taking initial steps to unwind a signature post-recession stimulus policy by trimming back its massive balance sheet.
Econ Focus , Issue 3Q , Pages 30-30

Discussion Paper
Ten years later – Did QE work?

By November 2008, the Global Financial Crisis, which originated in the residential housing market and the shadow banking system, had begun to turn into a major recession, spurring the Federal Open Market Committee (FOMC) to initiate what we now refer to as quantitative easing (QE). In this blog post, we draw upon the empirical findings of post-crisis academic research's including our own work's to shed light on the question: Did QE work?
Liberty Street Economics , Paper 20190508

Working Paper
Quantitative Easing and Bank Risk Taking: Evidence from Lending

We empirically assess the effect of reserve accumulation as a result of quantitative easing (QE) on bank-level lending and risk taking activity. To overcome the endogeneity of bank-level reserve holdings to banks' other portfolio decisions, we employ instruments made available by a regulatory change that strongly influenced the distribution of reserves in the banking system. Consistent with theories of the portfolio substitution channel in which the transmission of QE depends in part on reserve creation itself, we document that reserves created in two distinct QE programs led to higher total ...
Finance and Economics Discussion Series , Paper 2017-125

Working Paper
Did QE Lead Banks to Relax Their Lending Standards? Evidence from the Federal Reserve's LSAPs

Using confidential loan officer survey data on lending standards and internal risk ratings on loans, we document an effect of large-scale asset purchase programs (LSAPs) on lending standards and risk-taking. We exploit cross-sectional variation in banks? holdings of mortgage-backed securities to show that the first and third round of quantitative easing (QE1 and QE3) significantly lowered lending standards and increased loan risk characteristics. The magnitude of the effects is about the same in QE1 and QE3, and is comparable to the effect of a one percentage point decrease in the Fed funds ...
Finance and Economics Discussion Series , Paper 2017-093

Working Paper
Misallocation Costs of Digging Deeper into the Central Bank Toolkit

Central bank large-scale asset purchases, particularly the purchase of corporate bonds of nonfinancial firms, can induce a misallocation of resources through their heterogeneous effect on firms cost of capital. First, we analytically demonstrate the mechanism in a static model. We then evaluate the misallocation of resources induced by corporate bond buys and the associated output losses in a calibrated heterogeneous firm New Keynesian DSGE model. The calibrated model suggests misallocation effects from corporate bond buys can be large enough to make them less effective than government bond ...
Finance and Economics Discussion Series , Paper 2017-076

Working Paper
An agency problem in the MBS market and the solicited refinancing channel of large-scale asset purchases

In this paper, we document that mortgage-backed securities (MBS) held by the Federal Reserve exhibit faster principal prepayment rates than MBS held by the rest of the market. Next, we show that this stylized fact persists even when controlling for factors that affect prepayment behavior, and thus determine the MBS that are delivered to the Federal Reserve. After ruling out several potential explanations for this result, we provide evidence that points to an agency problem in the secondary market for MBS, which has not previously been documented, as the most likely explanation for the ...
Finance and Economics Discussion Series , Paper 2015-27

Discussion Paper
Do Asset Purchase Programs Push Capital Abroad?

Euro area sovereign bond yields fell to record lows and the euro weakened after the European Central Bank (ECB) dramatically expanded its asset purchase program in early 2015. Some analysts predicted massive financial outflows spilling out of the euro area and affecting global markets as investors sought higher yields abroad. These arguments ignore balance of payments accounting, which requires any financial outflow from the euro area to be matched by a similar-sized inflow, absent a quick and substantial current account improvement. The focus on cross-border financial flows also is misguided ...
Liberty Street Economics , Paper 20150812

Journal Article
Has forward guidance been effective?

A. Lee Smith and Thealexa Becker compare forward guidance announcements with changes in the effective federal funds rate and find the two policy measures have had similar macroeconomic effects.
Macro Bulletin

Journal Article
Did quantitative easing work?

Did QE lower yields and stimulate the economy? What about risks? Weighing the evidence requires a bit of theory.
Economic Insights , Volume 1 , Issue 1 , Pages 5-13

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