Having earlier reviewed some of the reasons in favor of additional quantitative easing (QE2), I’d like to acknowledge some of the dissenting views.
Category Archives: Federal Reserve
More than one tool for the Fed
One theme that emerged from the monetary policy conference at the Federal Reserve Bank of Boston on Friday and Saturday is that, as I stressed in my discussion of the recent FOMC minutes, the Fed is not thinking of large-scale asset purchases as the only tool available in the current environment.
More discussion of options for the Fed
I’m in Boston today at a conference at the Federal Reserve Bank. Fed Chair Ben Bernanke spoke this morning and this afternoon I presented results from my research with Cynthia Wu. I hope to have time later this weekend to say a little more about some of the presentations and discussion. But for now let me provide a link to an interview with CNBC on some of these issues.
Why is the Fed doing this?
Most observers now seem convinced that the Federal Reserve will shortly implement QE2, a second round of quantitative easing. It’s worth taking a look at what QE2 is and is not expected to accomplish.
The market moves ahead of the Fed
Over the last month, a consensus seems to have emerged that (1) the Fed has the ability to depress long-term yields further, and (2) the Fed has the intention to implement such measures. That raises the possibility that recent market moves represent a bet already placed by market participants on the basis of the logical implications of (1) and (2).
QE2: estimates of the potential effects
As the conviction grows that the Federal Reserve will adopt a second round of quantitative easing (dubbed by some as “QE2”), I thought it might be helpful to survey some of the different estimates of what effect this might have on long-term interest rates.
What’s the Fed signaling?
There’s an aspect of Tuesday’s statement from the FOMC that’s not being emphasized by many analysts.
Should the Fed try to depress long-term yields further?
I’ve been sharing with readers my recent research with Cynthia Wu, in which we found that the Fed could likely lower long-term interest rates further by buying more long-term securities, even though the short-term rate is essentially zero and even though the newly created reserves would simply sit idle in banks’ accounts with the Fed. Here I’d like to take up the question of whether such a policy would be desirable.
Policy tools that could lower interest rates further
Even though the overnight interest rate has been stuck near zero for 20 months, are there options available to the Federal Reserve or the U.S. Treasury to bring longer-term yields down further? I have been looking into this question with Cynthia Wu, an extremely talented UCSD graduate student. We present our findings in a new research paper, some of whose results I summarize here.
New database on the maturity structure of publicly-held debt
I have been working on a project with UCSD graduate student Cynthia Wu to try to assess the potential for the Federal Reserve to continue to influence long-term interest rates even when the short-term interest rate is essentially at zero. I’ll be relating the conclusions from that research in a few days. But first I’d like to call attention to a new data set that we developed on the maturity structure of publicly-held debt which may be of interest to other researchers. As Paul Krugman likes to warn, this one is just for the wonks.