The asymmetric effects of quantitative tightening and easing on financial markets

Simon Lloyd and Daniel Ostry

Economics Letters, 2024, vol. 238, issue C

Abstract: We study the asymmetric impact of US quantitative tightening (QT) and easing (QE) on financial markets using high-frequency large-scale asset purchase surprises around FOMC announcements. We document that QT surprises since 2017 had larger and more persistent effects on US Treasury yields than QE surprises. Using numerous empirical decompositions of bond yields, we show that this asymmetry arises from the differential effect of QT vs. QE surprises on expectations of future short-term rates (linked to the so-called signalling channel) at shorter maturities.

Keywords: Bond yields; Monetary policy; Quantitative tightening; Quantitative easing; Shocks (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 E58 G12 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:238:y:2024:i:c:s0165176524002052

DOI: 10.1016/j.econlet.2024.111722

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