A Skeptical View of the Impact of the Fed’s Balance Sheet

Abstract

The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

U.S. Monetary Policy and International Bond Markets

“…9. It is possible that other economic or political news or policy actions by foreign central banks might coincide with the U.S. monetary policy surprises, especially during the unconventional policy regime; see Greenlaw et al (2018) for a detailed analysis of major news events on the day when the U.S. bond market had a big move during the unconventional policy regime. However, as documented by Albagli et al (2018), while U.S. monetary policy news is not always the only event moving U.S. Treasury yields on FOMC announcement days, this is the case much more often than not-the overlap frequency between FOMC meetings and all other major country events is only about 7% at the daily frequency.…”

“…It is possible that other economic or political news or policy actions by foreign central banks might coincide with the U.S. monetary policy surprises, especially during the unconventional policy regime; see Greenlaw et al. () for a detailed analysis of major news events on the day when the U.S. bond market had a big move during the unconventional policy regime. However, as documented by Albagli et al.…”

Quantitative Easing in the 1930s

“…According to the most generous estimates, the total effect of all post‐2008 operations was to reduce 10‐year Treasury yields by about 1% (Greenlaw et al. ).…”

“…Certainly, these declines in yields were large relative to estimated effects of post-2008 QE operations. According to the most generous estimates, the total effect of all post-2008 operations was to reduce 10-year Treasury yields by about 1% (Greenlaw et al 2018).…”

“…Portfolio-balance effects are controversial (e.g., Greenlaw et al 2018). Event studies find statistically significant changes in yields around announcements of coming QE operations, but it is hard to rule out the possibility these were due to the signaling channel (Bernanke, Reinhart, and Sack 2004, Gagnon et al 2011, Krishnamurthy and Vissing-Jorgensen 2011, Wright 2012, Woodford 2013, Bauer and Rudebusch 2014.…”