The Original Operation Twist: The War Finance Corporation's War Bond Purchase, 1918-1920

James Butkiewicz and Mihaela Solcan ()
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Mihaela Solcan: Department of Economics, University of Delaware

No 12-13, Working Papers from University of Delaware, Department of Economics

Abstract: In 1918 the United States Treasury delegated to the War Finance Corporation, a newly-created off-budget federal agency, the task of buying Liberty and later victory bonds in an effort to stabilize prices. Bayesian vector autoregression analysis of the bond purchase indicate that the WFC purchase provided significant price support, and lowered bond yields while the program operated. Once WFC purchase ended, war bond yields increased substantially. However, since the war bond purchases were financed by the sale of short-term debt certificates, the bond purchases increased short rates while reducing long rates. The WFC’s bond purchases twisted the yield curve.

Keywords: E43; N12; M22; N42; G12 (search for similar items in EconPapers)
JEL-codes: E43 G12 N12 N42 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2012
New Economics Papers: this item is included in nep-his and nep-mac
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The original Operation Twist: the War Finance Corporation's war bond purchases, 1918–1920 (2016)
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