The Effects of Quantitative Easing: Taking a Cue from Treasury Auctions / Yuriy Gorodnichenko, Walker Ray.

Format:

Book

Author/Creator:

Gorodnichenko, Yuriy.

Contributor:

National Bureau of Economic Research.

Ray, Walker.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24122.

NBER working paper series no. w24122

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Effects of Quantitative Easing

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

To understand the effects of large-scale asset purchase programs recently implemented by central banks, we study how markets absorb large demand shocks for risk-free debt. Using high-frequency identification, we exploit the structure of the primary market for U.S. Treasuries to isolate demand shocks. These shocks are sizable, leading to large movements in Treasury yields and impacting corporate borrowing rates. Informed by a preferred habitat model of the term structure, we test for "local" demand effects and find evidence consistent with theoretical predictions. Crucially, this local effect is strongest when financial markets are disrupted. Our estimates are consistent with the view that quantitative easing worked mainly via market segmentation, with a potentially limited role for other channels.

Notes:

Print version record

December 2017.