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Discussion Paper
Japan’s Experience with Yield Curve Control
In September 2016, the Bank of Japan (BoJ) changed its policy framework to target the yield on ten-year government bonds at “around zero percent,” close to the prevailing rate at the time. The new framework was announced as a modification of the Bank's earlier policy of rapid monetary base expansion via large-scale asset purchases—a policy that market participants increasingly regarded as unsustainable. While the BoJ announced that the rapid pace of government bond purchases would not change, it turned out that the yield target approach allowed for a dramatic scaling back in purchases. ...
Report
The Federal Reserve’s Market Functioning Purchases
In March 2020, massive customer selling of U.S. Treasury securities and agency mortgage-backed securities (MBS) triggered by the COVID-19 pandemic overwhelmed dealers’ capacity to intermediate trades, contributing to a marked deterioration of market functioning. The Federal Reserve promptly took numerous steps to address the market disruptions, including the initiation of market functioning purchases of Treasury securities and agency MBS. Purchases quickly expanded to over $100 billion per day as the Fed announced plans to buy securities “in the amounts needed” to support market ...
Have Fed Asset Purchases Reshaped Bank Balance Sheets? Part 1
In response to the COVID-19 crisis, the Fed bought trillions of dollars in bonds. Did this cause U.S. commercial banks to “de-risk” their assets?
Speech
Panel remarks at Bank Indonesia–Federal Reserve Bank of New York Joint International Seminar, Bali Indonesia
Remarks at Bank Indonesia?Federal Reserve Bank of New York Joint International Seminar, Bali Indonesia.
Working Paper
Cheap Talk and the Efficacy of the ECB’s Securities Market Programme: Did Bond Purchases Matter?
In 2010, in response to an ever-worsening fiscal crisis, the ECB began purchasing sovereign debt from troubled euro-area countries through its Securities Market Programme (SMP). This program was designed to improve market functioning and restore the monetary transmission mechanism within the euro area. This paper does not test those ideals. Rather, we test whether SMP purchases systematically lowered peripheral yields and spreads. We find limited evidence of purchase effects but large announcement effects. In addition, on days in which the ECB was believed to have made large purchases, yields ...
Have Fed Asset Purchases Reshaped Bank Balance Sheets? Part 2
The de-risking of commercial banks’ balance sheets since 2008 likely reflects regulatory changes and economic conditions rather than the Fed’s bond buying.
Speech
Implementing monetary policy with the balance sheet: keynote remarks for ECB Workshop: Money Markets, Monetary Policy Implementation, and Central Bank Balance Sheets, Frankfurt am Main, Germany
Keynote Remarks for ECB Workshop: Money Markets, Monetary Policy Implementation, and Central Bank Balance Sheets, Frankfurt am Main, Germany.
Journal Article
The Federal Reserve’s Market Functioning Purchases
This article assesses the rationale, operations, and implications of the Federal Reserve’s market functioning purchases. The security purchases were introduced in March 2020, when massive customer selling of U.S. Treasury securities and agency mortgage-backed securities triggered by the COVID-19 pandemic overwhelmed dealers’ capacity to intermediate trades, contributing to a marked deterioration of market functioning. Purchases quickly expanded to over $100 billion per day as the Fed announced plans to buy securities “in the amounts needed” to support market functioning and the ...
Discussion Paper
How Do the Fed's MBS Purchases Affect Credit Allocation?
It is sometimes said that the Federal Reserve should not engage in “credit allocation.” But what does credit allocation actually mean? And how do current Fed policies affect the allocation of credit? In this post, we describe two separate ideas often associated with credit allocation. The first idea is that the Fed should not take credit risk, which taxpayers would ultimately have to bear. The second idea is that the Fed’s actions should not influence the flow of credit to particular sectors. We consider whether the Fed’s holdings of agency mortgage-backed securities (MBS) could ...
Speech
The U.S. economic outlook and the implications for monetary policy: remarks at Money Marketeers of New York University, New York City
Remarks at Money Marketeers of New York University, New York City.