A Structural Investigation of Quantitative Easing

Gregor Boehl, Gavin Goy () and Felix Strobel

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: Did the Federal Reserves' Quantitative Easing (QE) in the aftermath of the financial crisis have macroeconomic effects? To answer this question, we estimate a large-scale DSGE model over the sample from 1998 to 2020, including data of the Fed's balance sheet. We allow for QE to affect the economy via multiple channels that arise from several financial frictions. Our nonlinear Bayesian likelihood approach fully accounts for the zero lower bound on nominal interest rates. We find that between 2009 to 2015, QE increased output by about 1.2 percent. This reflects a net increase in investment of nearly 9 percent, that was accompanied by a 0.7 percent drop in aggregate consumption. Both, government bond and capital asset purchases were effective in improving financing conditions. Especially capital asset purchases significantly facilitated new investment and increased the production capacity. Against the backdrop of a fall in consumption, supply side effects dominated which led to a mild disinflationary effect of about 0.25 percent annually.

Keywords: Quantitative Easing; Liquidity Facilities; Zero Lower Bound; Nonlinear Bayesian Estimation (search for similar items in EconPapers)
JEL-codes: C63 E32 E58 E63 (search for similar items in EconPapers)
Pages: 97
Date: 2020-07
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: A Structural Investigation of Quantitative Easing (2024)
Working Paper: A structural investigation of quantitative easing (2021)
Working Paper: A Structural Investigation of Quantitative Easing (2020)
Working Paper: A structural investigation of quantitative easing (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2020_193

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