EconPapers    
Economics at your fingertips  
 

Counterfactual Analysis in Macroeconometrics: An Empirical Investigation into the Effects of Quantitative Easing

Mohammad Pesaran and Ronald Smith

No 6618, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper is concerned with ex ante and ex post counterfactual analyses in the case of macroeconometric applications where a single unit is observed before and after a given policy intervention. It distinguishes between cases where the policy change affects the model's parameters and where it does not. It is argued that for ex post policy evaluation it is important that outcomes are conditioned on ex post realized variables that are invariant to the policy change but nevertheless influence the outcomes. The effects of the control variables that are determined endogenously with the policy outcomes can be solved out for the policy evaluation exercise. An ex post policy ineffectiveness test statistic is proposed. The analysis is applied to the evaluation of the effects of the quantitative easing (QE) in the UK after March 2009. It is estimated that a 100 basis points reduction in the spread due to QE has an impact effect on output growth of about one percentage point, but the policy impact is very quickly reversed with no statistically significant effects remaining within 9-12 months of the policy intervention.

Keywords: quantitative easing (QE); macroeconomics; policy evaluation; counterfactuals; UK economic policy (search for similar items in EconPapers)
JEL-codes: C18 C54 E65 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012-06
References: Add references at CitEc
Citations: View citations in EconPapers (47)

Published - published in: Research in Economics, 2016, 70 (2), 262-280

Downloads: (external link)
https://docs.iza.org/dp6618.pdf (application/pdf)

Related works:
Journal Article: Counterfactual analysis in macroeconometrics: An empirical investigation into the effects of quantitative easing (2016) Downloads
Working Paper: Counterfactual Analysis in Macroeconometrics: An Empirical Investigation into the Effects of Quantitative Easing (2014) Downloads
Working Paper: Counterfactual Analysis in Macroeconometrics: An Empirical Investigation into the Effects of Quantitative Easing (2012) Downloads
Working Paper: Counterfactual Analysis in Macroeconometrics: An Empirical Investigation into the Effects of Quantitative Easing (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp6618

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
library@iza.org

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte (hinte@iza.org).

 
Page updated 2025-01-07
Handle: RePEc:iza:izadps:dp6618