The Financial Market Effects of the Federal Reserve's Large-Scale Asset Purchases

<p>Since December 2008 the Federal Reserve's traditional policy instrument the target federal funds rate has been effectively at its lower bound of zero. In order to further ease the stance of monetary policy as the economic outlook deteriorated the Federal Reserve purchased substantial quantities of assets with medium and long maturities. In this paper we explain how these purchases were implemented and discuss the mechanisms through which they can affect the economy. We present evidence that the purchases led to economically meaningful and long-lasting reductions in longer-term interest rates on a range of securities including securities that were not included in the purchase programs. These reductions in interest rates primarily reflect lower risk premiums including term premiums rather than lower expectations of future short-term interest rates.</p><p>This work has been selected by scholars as being culturally important and is part of the knowledge base of civilization as we know it. This work was reproduced from the original artifact and remains as true to the original work as possible. Therefore you will see the original copyright references library stamps (as most of these works have been housed in our most important libraries around the world) and other notations in the work.</p><p>This work is in the public domain in the United States of America and possibly other nations. Within the United States you may freely copy and distribute this work as no entity (individual or corporate) has a copyright on the body of the work.</p><p>As a reproduction of a historical artifact this work may contain missing or blurred pages poor pictures errant marks etc. Scholars believe and we concur that this work is important enough to be preserved reproduced and made generally available to the public. We appreciate your support of the preservation process and thank you for being an important part of keeping this knowledge alive and relevant.</p>