Measuring the Effects of Federal Reserve Forward Guidance and Asset Purchases on Financial Markets /
Swanson, Eric T.
Measuring the Effects of Federal Reserve Forward Guidance and Asset Purchases on Financial Markets / Eric T. Swanson. - Cambridge, Mass. National Bureau of Economic Research 2017. - 1 online resource: illustrations (black and white); - NBER working paper series no. w23311 . - Working Paper Series (National Bureau of Economic Research) no. w23311. .
April 2017.
I extend the methods of G¨urkaynak, Sack, and Swanson (2005) to separately identify the effects of Federal Reserve forward guidance and large-scale asset purchases (LSAPs) during the 2009-15 U.S. zero lower bound (ZLB) period. I find that both forward guidance and LSAPs had substantial and highly statistically significant effects, comparable in magnitude to the effects of the federal funds rate before the ZLB. Forward guidance was more effective than LSAPs at moving short-term Treasury yields, while LSAPs were more effective than forward guidance and the federal funds rate at moving longer-term Treasury and corporate bond yields. I estimate that the effects of LSAP announcements were very persistent, with the exception of the very large and perhaps special March 2009 "QE1" announcement. The effects of forward guidance are slightly less persistent, but the difference is not statistically significant and is likely due to the FOMC's forward guidance announcements having a relatively shorter horizon.
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Mode of access: World Wide Web.
Measuring the Effects of Federal Reserve Forward Guidance and Asset Purchases on Financial Markets / Eric T. Swanson. - Cambridge, Mass. National Bureau of Economic Research 2017. - 1 online resource: illustrations (black and white); - NBER working paper series no. w23311 . - Working Paper Series (National Bureau of Economic Research) no. w23311. .
April 2017.
I extend the methods of G¨urkaynak, Sack, and Swanson (2005) to separately identify the effects of Federal Reserve forward guidance and large-scale asset purchases (LSAPs) during the 2009-15 U.S. zero lower bound (ZLB) period. I find that both forward guidance and LSAPs had substantial and highly statistically significant effects, comparable in magnitude to the effects of the federal funds rate before the ZLB. Forward guidance was more effective than LSAPs at moving short-term Treasury yields, while LSAPs were more effective than forward guidance and the federal funds rate at moving longer-term Treasury and corporate bond yields. I estimate that the effects of LSAP announcements were very persistent, with the exception of the very large and perhaps special March 2009 "QE1" announcement. The effects of forward guidance are slightly less persistent, but the difference is not statistically significant and is likely due to the FOMC's forward guidance announcements having a relatively shorter horizon.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.