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.
Category Archives: financial markets
Causes of the flash crash
Donald Marron calls our attention to the report of the CFTC and the SEC on the causes of bizarre prices at which some stocks traded last May.
Portfolio Crowding Out, Illustrated
I have been updating graphs for my money and banking course, and here is the graph I generated to illustrate the tremendous impact of government borrowing on interest rates via portfolio crowding out (as argued in this post).
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.
Long-term perspective on the stock market
Nobody can tell you for sure what’s going to happen next in the stock market. But thanks to the nice data set collected and maintained by Yale Professor Robert Shiller we can speak with authority about what it’s been doing for the last 140 years.
Escape from arbitrage: the movie
Two of my favorite economists, Bilkent University Professor Refet Gurkaynak and Johns Hopkins University Professor Jonathan Wright, have a nice new paper in which they survey macroeconomic theories of the term structure of interest rates. As an unusual digital supplement to their paper, they put together a movie in which you can watch the arbitrage glue that normally holds markets together start to fail as financial markets literally fell apart at the end of 2008.
Ever so slightly less contractionary
What is the significance of yesterday’s statement from the FOMC?
Contagion, Re-examined
For a while, contagion had dropped off the (research) map. But it’s now back (thanks to Greece et al!), in both research and policy arenas. A new symposium published in Pacific Economic Review covers the topic.
Options for monetary stimulus
The latest economic data have surely warranted a downward revision in the Federal Reserve’s assessment of near-term economic performance. It therefore might be a good time to review the steps the Fed could take if it wishes to provide further economic stimulus.
The Return of Portfolio Balance Models: “The Large Scale Asset Purchases Had Large International Effects”
In a new working paper, the St. Louis Fed’s Christopher Neely argues The Large Scale Asset Purchases Had Large International Effects.
The Federal Reserve’s large scale asset purchases (LSAP) of agency debt,
MBSs and long-term U.S. Treasuries not only reduced long-term U.S. bond yields also
significantly reduced long-term foreign bond yields and the spot value of the dollar. …