Unexpected Supply Effects of Quantitative Easing and Tightening

Stefania D'Amico and Tim Seida
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Tim Seida: https://www.chicagofed.org/people/s/seida-tim

No WP-2020-17, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: To analyze the evolution of quantitative easing’s (QE) and tightening’s (QT) effects across consecutive announcements, we focus on their unexpected component. Treasury yield sensitivities to QE and QT supply surprises do not fall monotonically over time, thus later announcements seemed to remain powerful; yield sensitivities to QT surprises are on average larger than sensitivities to QE surprises, implying supply effects did not diminish during periods of market calm amid economic expansion; finally, yield sensitivities are amplified by the amount of interest-rate uncertainty prevailing before the announcement, implying that turning points in the balance sheet policy tended to elicit larger reactions.

Keywords: Balance sheet policy surprises; quantitative easing and tightening; asset supply effects (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 E58 (search for similar items in EconPapers)
Pages: 52
Date: 2020-07-31
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedhwp:92698

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DOI: 10.21033/wp-2020-17

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