Whatever-It-Takes Policymaking during the Pandemic

Kathryn Dominguez and Andrea Foschi

No 32115, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Central banks across the globe introduced large-scale asset purchase programs to address the unprecedented circumstances experienced during the pandemic. Many of these programs were announced as open-ended to shock-and-awe market participants and restore confidence in financial markets. This paper examines whether these whatever-it-takes announcements had larger effects than announcements with explicit limits on scale. We use a narrative approach to categorize announcements made by twenty-two central banks, and event study, propensity-score-matching, and local projection methods to measure the short-term effects of policy announcements on exchange rates and sovereign bond yields. We find that on average a central bank's first whatever-it-takes announcement lowers 10-year bond yields by an additional 47 basis points relative to size-limited announcements, suggesting that communication of potential policy scale matters. Our results for yields hold for both advanced and emerging economies, while exchange rates go in opposing directions, muting their response when we group all countries together.

JEL-codes: E44 E58 F42 G14 (search for similar items in EconPapers)
Date: 2024-02
New Economics Papers: this item is included in nep-ban, nep-cba, nep-ifn and nep-mon
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Published as Kathryn M.E. Dominguez & Andrea Foschi, 2024. "Whatever-it-takes policymaking during the pandemic," Journal of International Economics, .
Published as Whatever-It-Takes Policymaking during the Pandemic , Kathryn M. E. Dominguez, Andrea Foschi. in NBER International Seminar on Macroeconomics 2023 , Frankel and Rey. 2024

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