scholarly journals The Large-Scale Asset Purchases Had Large International Effects

2012 ◽  
Author(s):  
Christopher J. Neely
Keyword(s):  
Large Scale ◽  
Asset Purchases

The non-linear effects of the Fed asset purchases

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Alessio Anzuini
Keyword(s):  
Financial Markets ◽  
Large Scale ◽  
Balance Sheet ◽  
Monetary Economics ◽  
American Economic Review ◽  
Vector Autoregressive ◽  
Portfolio Balance ◽  
State Dependent ◽  
Linear Effects ◽  
Asset Purchases

Abstract The Federal Reserve responded to the great financial crisis deploying new monetary policy tools, the most notable of which being the expansion of its balance sheet. In a recent paper, Weale, M., and T. Wieladek. 2016. “What Are the Macroeconomic Effects of Asset Purchases?” Journal of Monetary Economics 79 (C): 81–93 show that the asset purchases were effective in stimulating economic activity as well as inflation and asset prices. Here I show that their results are state dependent: large scale asset purchase are effective only when financial markets are impaired. Financial markets are under stress when the effective risk-bearing capacity of the financial sector is drastically reduced, i.e. when the excess bond premium (EBP) of Gilchrist, S., and E. Zakrajšek. 2012. “Credit Spreads and Business Cycle Fluctuations.” The American Economic Review 102 (4): 1692–72 exceed a certain threshold. Using an estimated threshold vector autoregressive model conditional on the EBP regime, I show that an increase in the balance sheet has expansionary effects on GDP and inflation when EBP is high, but not when it is low (as its effects become mostly insignificant). I argue that the high EBP can be interpreted as a proxy of market dis-functioning so that only when this channel of transmission is on, the unconventional policy is particularly effective. This suggests that models of transmission of unconventional policies, based on asset purchases, should focus also on the market functioning channel and not only on the portfolio balance one.

Use of the Federal Reserve's repo operations and changes in dealer balance sheets

FEDS Notes ◽  
2021 ◽  
Vol 2021 (2961) ◽  
Author(s):  
Mark Carlson ◽  
◽  
Zack Saravay ◽  
Mary Tian ◽  
◽  
...  
Keyword(s):  
Financial Crisis ◽  
Large Scale ◽  
Banking System ◽  
Economic Downturn ◽  
Federal Funds ◽  
Federal Funds Rate ◽  
Balance Sheets ◽  
Asset Purchases ◽  
The 2008 Financial Crisis ◽  
Repurchase Agreements

Before the 2008 financial crisis, the Federal Reserve (Fed) regularly conducted repurchase agreements (repos) in a fairly modest size with primary dealers to adjust the supply of reserves in the banking system and to keep the federal funds rate at the target set by the FOMC. During the economic downturn that followed the financial crisis, the Fed engaged in large scale asset purchases in order to provide additional monetary accommodation, and those purchases significantly increased the supply of reserves and eliminated the need for the Fed to engage in repo operations to increase reserves in the system.

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