An Evaluation of Event-Study Evidence on the Effectiveness of the FOMC’s LSAP Program: Are the Announcement Effects Identified?

Daniel Thornton

No 2013-033, Working Papers from Federal Reserve Bank of St. Louis

Abstract: The consensus in monetary policy circles that the Fed?s large-scale asset purchases, known as quantitative easing (QE), have significantly reduced long-term yields is due in part to event studies, which show that long-term yields decline on QE announcement days. However, little attention has been given to whether these announcement effects are identified. This paper contributes to the literature by investigating whether announcement effects associated with the QE announcements used in the literature are identified. The analysis shows that none of announcement effects satisfy the strict requirements for identification. At best, event-studies provide modest evidence that QE reduces long-term yields.

Pages: 47 pages
Date: 2013
New Economics Papers: this item is included in nep-mon
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