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Working Paper
How Persistent Are Unconventional Monetary Policy Effects?
This paper argues that one cannot precisely estimate the persistence of unconventional monetary policy (UMP) effects, especially with short samples and few observations. To make this point, we illustrate that the most influential model on the topic exhibits structural instability, and sensitivity to specification and outliers that render the conclusions unreliable. Restricted models that respect more plausible asset return predictability are more stable and imply that UMP shocks were persistent. Estimates of the dynamic effects of shocks should respect the limited predictability in asset ...
Speech
The research-policy nexus: ZLB, JMCB and FOMC: remarks at the Conference Celebrating the 50th Anniversary of the Journal of Money, Credit and Banking, Federal Reserve Bank of New York, New York City
Remarks at the Conference Celebrating the 50th Anniversary of the Journal of Money, Credit and Banking, Federal Reserve Bank of New York, New York City.
Discussion Paper
What’s Driving Up Money Growth?
Two key monetary aggregates, M1 and M2, have grown quickly recently—especially M1, the narrow aggregate. In this post, we show that we can attribute most, but not all, of the recent high money growth rate of M1 to low current interest rates as well as the growth in bank reserves that has resulted from the Fed’s asset purchase programs. It’s unlikely that the current high growth rate will continue in the long term, however, as both low interest rates and the Fed’s expansion of bank reserves will likely be reversed as economic growth accelerates.
Working Paper
Term Structure Modeling with Supply Factors and the Federal Reserve's Large Scale Asset Purchase Programs
This paper estimates an arbitrage-free term structure model with both observable yield factors and Treasury and Agency MBS supply factors, and uses it to evaluate the term premium effects of the Federal Reserve's large-scale asset purchase programs. Our estimates show that the first and the second large-scale asset purchase programs and the maturity extension program jointly reduced the 10-year Treasury yield by about 100 basis points.
Speech
The Federal Reserve's experience purchasing and reinvesting agency MBS: remarks at the Bank of England, London
Remarks at the Bank of England, London.
Working Paper
How Persistent Are Unconventional Monetary Policy Effects?
Event studies show that the Federal Reserve’s announcements of forward guidance and large-scale asset purchases had large and desired effects on asset prices but these studies do not tell us how long such effects last. Wright (2012) used a structural vector autoregression (SVAR) to argue that unconventional policies have very transient effects on bond yields, with half-lives of 3 to 6 months. The present paper shows, however, that this inference is unsupported for several reasons. First, accounting for model uncertainty greatly lengthens the estimated persistence. Second, and more ...
Report
The effectiveness of nonstandard monetary policy measures: evidence from survey data
We assess the perception of professional forecasters regarding the effectiveness of unconventional monetary policy measures announced by the U.S. Federal Reserve after the collapse of Lehman Brothers. Using survey data collected at the individual level, we analyze the change in forecasts of Treasury and corporate bond yields around the announcement dates of nonstandard monetary policy measures. We find that professional forecasters expect bond yields to drop significantly for at least one year after the announcement of accommodative policies.
Working Paper
How Persistent Are Unconventional Monetary Policy Effects?
The weight of the evidence indicates that unconventional monetary policy (UMP) shocks had persistent effects on yields. To make this point, this paper illustrates that the most influential SVAR model of UMP effects, which implies transient effects, exhibits structural instability, sensitivity to specification and single observations that render the conclusions unreliable. Restricted SVAR models that limit asset return predictability are more stable and imply that UMP shocks were persistent. This conclusion is consistent with evidence from micro studies, surveys of professional forecasters, ...
Working Paper
How Persistent Are Unconventional Monetary Policy Effects?
Event studies show that the Federal Reserve's announcements of forward guidance and large Scale asset purchases had large and desired effects on asset prices but they do not tell us how long such effects last. Wright (2012) used a structural vector autoregression (SVAR) to argue that unconventional policies have very transient effects on bond yields, with half-lives of 3 to 6 months. The present paper shows, however, that the SVAR is very possibly misspecified, structurally unstable, forecasts very poorly and therefore delivers spurious inference. In addition, the implied in-sample return ...
Speech
Comments on “A Skeptical View of the Impact of the Fed’s Balance Sheet”: remarks at the 2018 U.S. Monetary Policy Forum, New York City
Remarks at the 2018 U.S. Monetary Policy Forum, New York City.