scholarly journals Measuring the Effects of Federal Reserve Forward Guidance and Asset Purchases on Financial Markets

2017 ◽  
Author(s):  
Eric Swanson
Keyword(s):  
Financial Markets ◽  
Federal Reserve ◽  
Forward Guidance ◽  
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.

scholarly journals Combining Negative Rates, Forward Guidance and Asset Purchases: Identification and Impacts of the ECB's Unconventional Policies

2021 ◽  
Author(s):  
Massimo Rostagno ◽  
Carlo Altavilla ◽  
Giacomo Carboni ◽  
Wolfgang Lemke ◽  
Roberto Motto ◽  
...  
Keyword(s):  
Forward Guidance ◽  
Asset Purchases

The World Economy

2007 ◽  
Vol 202 ◽  
pp. 9-33
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Federal Reserve ◽  
Risk Premia ◽  
Real Economy ◽  
Subprime Mortgages ◽  
Money Markets ◽  
Moderate Growth ◽  
The Us ◽  
Global Growth

Defaults on subprime mortgages in the US have triggered jitters in global financial markets over the course of this year, leading to a sharp rise in certain types of risk premia over the summer. The Federal Reserve and the ECB responded by injecting emergency liquidity into money markets, on top of which the Federal Reserve cut interest rates by 50 basis points in September. We expect the recent turbulence to be short-lived, and impacts on the real economy will be limited. We continue to expect global growth of 5.2 per cent this year, with a sharper slowdown in the US offset by persistently strong growth in China and a relatively robust outlook for Europe and Japan - despite disappointing outturns for the second quarter of 2007. Global growth is expected to ease to 4.7 per cent in 2008, reflecting more moderate growth in China and Europe. However, as annual global growth has exceeded 4.5 per cent in only nine years since 1970, global prospects continue to look promising. Risks to the outlook include a further rise in risk premia, which could potentially lead to major banking crises.

Central Europe external risks still outweigh internal

2017 ◽  
Keyword(s):  
Mutual Funds ◽  
Central Europe ◽  
Federal Reserve ◽  
Political Crisis ◽  
Checks And Balances ◽  
Content Type ◽  
Political Risks ◽  
The Us ◽  
Asset Purchases ◽  
Law And Justice

Significance Investors are brushing off mounting political risks in Poland despite an erosion of democratic checks and balances under the nationalist Law and Justice (PiS) government. In Romania, despite the rapidly escalating political crisis, the leu has strengthened slightly against the euro since the start of this year, since when the yield on benchmark ten-year Romanian local bonds has risen by 25 bps to 3.6%. This is still significantly below the 5% level before the ‘taper tantrum’ in mid-2013, which stemmed from the unexpected decision by the US Federal Reserve (Fed) to end its asset purchases. Impacts After post-US election outflows, EM mutual funds are once again enjoying sizeable inflows, with EM debt funds reaching a four-month high. Some of the strain on EM currencies will be relieved by the 2.5% fall in the dollar index against a basket of its peers since end-December. Smaller export-led CEE economies will benefit from factory orders in Germany rising in December at their fastest pace in 30 months.

Any US Fed balance sheet unwinding may be disorderly

2020 ◽  
Keyword(s):  
Financial Markets ◽  
Federal Reserve ◽  
Balance Sheet ◽  
Target Range ◽  
Treasury Bills ◽  
Content Type ◽  
Treasury Securities ◽  
The Us ◽  
Repo Rate ◽  
The Interest Rate

Subject US Federal Reserve policy. Significance The US repurchase agreement (repo) rate, the interest rate on overnight loans backed by Treasury securities to facilitate a range of transactions, suddenly soared above 5% on September 15, 2019. There were immediate effects across financial markets, but the Federal Reserve (Fed) quickly bought up Treasury bills and the repo rate returned to the Fed’s 2.00-2.25% target range. However, concerns linger about whether a spike could recur. The Fed has increased its balance sheet by more than 10% since September but sees this as a temporary adjustment rather than a policy change. Impacts Having narrowed to 3.7 trillion dollars by August 2019, the Fed’s balance sheet could pass its 4.4-trillion-dollar record this year. The Fed will seek to ensure its has enough resources for corporate-tax payment dates but without increasing its holdings indefinitely. Increasing the size of the Fed’s balance sheet could limit the effectiveness of further balance sheet expansion in a future crisis.

ECB QE and growth may obscure Polish political risk

2015 ◽  
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Federal Reserve ◽  
Economic Recovery ◽  
Coalition Government ◽  
Parliamentary Election ◽  
Quantitative Easing ◽  
Content Type ◽  
Inconclusive Result ◽  
The Us

Significance Having fallen against the resurgent dollar this year, the zloty has lately been strengthening, since the US Federal Reserve surprised financial markets by striking a more dovish stance than expected on both the timing and pace of the anticipated tightening in monetary policy. While the zloty and Polish stocks had suffered because of fears of a rise in US interest rates, local bonds have been underpinned by the ECB's quantitative easing (QE) programme. The effects of QE and a brisker economic recovery may temporarily offset the risk of an inconclusive result in the parliamentary election in October. Impacts Investors have yet to price in the risk of a hung parliament in Poland following October's election. The vote could lead to the formation of a weak and unstable coalition government. The risk of an unstable coalition is particularly high, given the strong likelihood that PO's share of the vote will decline sharply.

scholarly journals Macroeconomic Effects of Federal Reserve Forward Guidance

2012 ◽  
Vol 2012 (1) ◽  
pp. 1-80 ◽  
Author(s):  
Jeffrey R. Campbell ◽  
Charles L. Evans ◽  
Jonas D. M. Fisher ◽  
Alejandro Justiniano
Keyword(s):  
Federal Reserve ◽  
Forward Guidance ◽  
Macroeconomic Effects

VOLATILITY SPILLOVER EFFECT OF FEDERAL RESERVE’S BALANCE SHEET ON THE FINANCIAL AND GOODS MARKETS OF INDO-PAK REGION

2019 ◽  
Vol 14 (03) ◽  
pp. 1950015
Author(s):  
QASIM RAZA SYED ◽  
WASEEM SHAHID MALIK ◽  
BISHARAT HUSSAIN CHANG
Keyword(s):  
Financial Markets ◽  
Federal Reserve ◽  
Balance Sheet ◽  
Spillover Effect ◽  
Spillover Effects ◽  
The Other ◽  
Volatility Spillover ◽  
Monthly Basis ◽  
Volatility Spillovers ◽  
Volatility Spillover Effect

This paper examines the volatility spillover effect of the balance sheet of Federal Reserve (Fed) on the financial and goods markets of Pakistan, India and Bangladesh (collectively known as the Indo-Pak region). Diagonal BEKK-GARCH methodology is used to capture the volatility spillover effects on Indo-Pak economies. This study took data from the year 2004 to year 2019 on a monthly basis. The findings of the paper describe that there are volatility spillovers from Fed’s balance sheet to the financial markets of Pakistan, India and Bangladesh economies. On the other hand, there is also evidence of volatility spillovers from the balance sheet of Fed to the goods markets of these economies.

Sign in / Sign up

Export Citation Format

Share Document