an “ inflationovershooting commitment, ” which amounts to maintaining monetary expansion until the 2 percent inflation target is exceeded in a stable manner. 10 see the may 10, 2010 press release for the ecb ’ s securities markets programme. 11 for example, the federal reserve chose to transact in the agency mbs market via external investment managers at the start of lsap i “ as a means of implementing the mbs program quickly and efficiently while at the same time minimizing operational and financial risks. … beginning on march 2, 2010, the new york fed began to use internal staff to execute mbs purchases. ” see faqs : mbs purchase program. 12 in a speech at jackson hole on august 31, 2012, ben bernanke discussed a cost - benefit framework for evaluating non - traditional monetary policy tools. he noted the tools ’ potential impacts on market functioning, financial stability, and the fed ’ s ability to exit policies when needed, as well as the risk of financial losses. 13 in the federal open market committee ’ s rules and authorizations, the “ guidelines for the conduct of system open market operations in federal - agency issues ” note that “ open market operations in federal - agency issues are not designed to support individual sectors of the market or to channel funds into issues of particular agencies. ” these guidelines were temporarily suspended in january 2009. 14 for trading volumes, visitwww. sifma. org / research / statistics. aspx. visit www. embs. com / secure / cgi - bin / asp / analyticsmenu. asp. for outstanding mbs, 15 there are no other non - sovereign debt markets that are of comparable depth and liquidity. 16 for more information on the tba market, see vickery and wright ( 2013 ). 8 / 10 bis central bankers'speeches 17 dollar rolls can be used to address a shortage of a specific security that is expected to be transitory. this tool is used somewhat regularly for a small portion of soma agency mbs purchases. coupon swaps can address shortages of a specific security that are not expected to be resolved quickly. this tool was last used in june 2010 to facilitate the settlement of fannie mae 5. 5 percent coupons, which stopped being originated shortly after purchase because of a sharp drop in primary mortgage rates. 18 this number includes settled and unsettled agency mbs positions. seeh. 4. 1 report on october 2

a useful catch - all term for this set of policies, it masks the fact that central banks make different choices in the assets they buy to expand their balance sheets. 6 central bank laws specifying which assets can be purchased and held outright vary, although nearly all central banks can buy and hold the debt issued by their sovereign. 7 indeed, most of the empirical work on the effectiveness of lsaps is based on the analysis of sovereign debt purchases. more recently, a number of central banks have extended their purchases into the corporate debt and asset - backed securities markets. the federal reserve act does not permit the purchase of privately issued debt such as corporate debt or privately issued abs. while this might appear to be a constraint for the federal reserve, purchases of non - sovereign debt by other central banks have been small — both in size and as a percentage of gdp — compared with the federal reserve ’ s purchases of agency mbs, which are guaranteed by federal agencies and can affect private borrowing rates. 8 in expanding their balance sheets through asset purchases, central banks must consider how their choice of assets — for example, sovereign debt, corporate bonds, or federal agency debt — will affect the policy transmission mechanism. central banks must also take into account any implementation challenges related to executing in a given market. there are many broad transmission channels through which an lsap program can provide additional monetary accommodation : increasing the monetary base and central bank liabilities — the qe channel reinforcing that interest rates will remain low — the signaling channel9 changing the quantity and mix of financial assets held by the private sector — the portfolio balance channel taking interest rate risk out of the private sector — the duration channel taking credit risk out of the private sector — the credit channel taking prepayment risk out of the private sector — the prepayment channel improving market function — the market function channel the purchases of different assets will have different degrees of impact across these channels. for example, sovereign assets will generally work primarily through the first four channels, while corporate bonds would also work through the credit channel and mbs would also work through the prepayment channel. for these first six channels, one can argue that it is the expected stock of security holdings to be purchased by a central bank that chiefly determines the amount of accommodation — that is, the impact the central bank ’ s purchases are expected to have on the size and duration of assets available to the public. alternatively, for the market function channel, the “ flow ” effects are most important