Measuring the Effects of Unconventional Monetary Policy on Asset Prices

Eric Swanson

No 21816, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: I adapt the methods of Gurkaynak, Sack, and Swanson (2005) to estimate two dimensions of monetary policy during the 2009-2015 zero lower bound period in the U.S. I show that, after a suitable rotation, these two dimensions can be interpreted as "forward guidance" and "large-scale asset purchases" (LSAPs). I estimate the sizes of the forward guidance and LSAP components of each FOMC announcement between January 2009 and June 2015, and show that those estimates correspond closely to identifiable features of major FOMC announcements over that period. Forward guidance has relatively small effects on the longest-maturity Treasury yields and essentially no effect on corporate bond yields, while LSAPs have large effects on those yields but essentially no effect on short-term Treasuries. Both types of policies have significant effects on medium-term Treasury yields, stock prices, and exchange rates.

JEL-codes: E44 E52 E58 (search for similar items in EconPapers)
Date: 2015-12
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: AP EFG ME
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Citations: View citations in EconPapers (30)

Published as Eric T. Swanson, 2016. "Measuring the effects of unconventional monetary policy on asset prices," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 19(2), pages 78-100, August.

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Related works:
Chapter: Measuring the Effects of Unconventional Monetary Policy on Asset Prices (2016)
Journal Article: Measuring the effects of unconventional monetary policy on asset prices (2016)
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