The effects of quantitative easing on interest rates
Subtitle: channels and implications for policy
By: Arvind Krishnamurthy, Annette Vissing-Jorgensen
Contributors: Vissing-Jorgensen, Annette, 1971-; National Bureau of Economic Research
Series: NBER working paper series -- working paper 17555; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 17555.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We evaluate the effect of the Federal Reserve's purchase of long-term Treasuries and other long-term bonds ("QE1" in 2008-2009 and "QE2" in 2010-2011) on interest rates.  Using an event-study methodology we reach two main conclusions.  First, it is inappropriate to focus only on Treasury rates as a policy target because QE works through several channels that affect particular assets differently.  We find evidence for a signaling channel, a unique demand for long-term safe assets, and an inflation channel for both QE1 and QE2, and an MBS pre-payment channel and a corporate bond default risk channel for QE1.  Second, effects on particular assets depend critically on which assets are purchased.  The event-study suggests that (a) mortgage-backed securities purchases in QE1 were crucial for lowering mortgage-backed security yields as well as corporate credit risk and thus corporate yields for QE1, and (b) Treasuries-only purchases in QE2 had a disproportionate effect on Treasuries and Agencies relative to mortgage-backed securities and corporates, with yields on the latter falling primarily through the market's anticipation of lower future federal funds rates"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 1/10/2012.

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