Flow effects of large-scale asset purchases

John Kandrac and Bernd Schlusche

Economics Letters, 2013, vol. 121, issue 2, 330-335

Abstract: How large-scale asset purchase (LSAP) programs affect financial markets is an important question for policy makers that face the zero lower bound. While so-called “stock effects”–that is, persistent shifts in asset prices observed as the result of an LSAP program–are relatively well documented in the literature, there has been little study of “flow effects” that may occur at the time of LSAP transactions. Using security-level transaction data related to four distinct programs over a period of roughly four years, we test for the presence of flow effects in both price and liquidity of Treasury securities. We show that flow effects in security prices were present during early LSAPs by the Federal Reserve, but they were of little economic significance. Alternatively, we find no evidence for systematic liquidity flow effects in any of the LSAP programs.

Keywords: LSAP; Quantitative easing; Open market operations; Liquidity; Monetary policy (search for similar items in EconPapers)
JEL-codes: E52 E58 E65 G12 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176513004102
Full text for ScienceDirect subscribers only

Related works:
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:eee:ecolet:v:121:y:2013:i:2:p:330-335

DOI: 10.1016/j.econlet.2013.09.003

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().