Measuring the Effects of Federal Reserve Forward Guidance and Asset Purchases on Financial Markets

Eric Swanson

No 23311, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: I extend the methods of G¨urkaynak, Sack, and Swanson (2005) to separately identify the effects of Federal Reserve forward guidance and large-scale asset purchases (LSAPs) during the 2009–15 U.S. zero lower bound (ZLB) period. I find that both forward guidance and LSAPs had substantial and highly statistically significant effects, comparable in magnitude to the effects of the federal funds rate before the ZLB. Forward guidance was more effective than LSAPs at moving short-term Treasury yields, while LSAPs were more effective than forward guidance and the federal funds rate at moving longer-term Treasury and corporate bond yields. I estimate that the effects of LSAP announcements were very persistent, with the exception of the very large and perhaps special March 2009 “QE1” announcement. The effects of forward guidance are slightly less persistent, but the difference is not statistically significant and is likely due to the FOMC’s forward guidance announcements having a relatively shorter horizon.

JEL-codes: E44 E52 E58 (search for similar items in EconPapers)
Date: 2017-04
New Economics Papers: this item is included in nep-mac and nep-mon
Note: AP EFG ME
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Citations: View citations in EconPapers (160)

Published as Eric T. Swanson, 2020. "Measuring the effects of federal reserve forward guidance and asset purchases on financial markets," Journal of Monetary Economics, .

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Related works:
Journal Article: Measuring the effects of federal reserve forward guidance and asset purchases on financial markets (2021)
Working Paper: Measuring the Effects of Federal Reserve Forward Guidance and Asset Purchases on Financial Markets (2016)
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