Shall We Twist?

Sophie Altermatt and Simon Beyeler

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: In recent monetary history, central banks around the world have started to introduce unconventional monetary policy measures, such as extending or restructuring the asset side of their balance sheet. The origin of these mon- etary policy tools goes back to an intervention by the U.S. Federal Reserve System under the Kennedy administration in 1961 known as Operation Twist. Operation Twist serves as a perfect laboratory to study the e ectiveness of such balance sheet policies, because interest rates neither were at their lower bound nor was the economy in a historical turmoil. We assess the actions of the FED and the Treasury under Operation Twist based on balance sheet data and evaluate their success using modern time series techniques. We find that, although being of rather moderate size, the joint policy actions were e ective in compressing the long-short spreads of the Treasury bond rates.

Keywords: Operation Twist; Monetary Policy; Interest Rates; Yield Curve; Time Series (search for similar items in EconPapers)
JEL-codes: C22 E43 E52 E63 E65 (search for similar items in EconPapers)
Date: 2018-05
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
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Working Paper: Shall we twist? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ube:dpvwib:dp1825

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