The Impact of Federal Reserve Asset Purchase Programmes : Another Twist

This article examines the effectiveness of recent Federal Reserve asset purchase programmes. We estimate that once we control for factors such as the size and the maturity profile of Treasury issuance, the new Maturity Extension Program (MEP) could have an impact comparable to the one we estimate for the Large-Scale Asset Purchase (LSAP) programme. The effectiveness of such programmes is limited by Treasury debt management policy. Indeed, the Treasury's extension of the average maturity of outstanding debt during LSAP is likely to have pushed up the 10-year bond yield significantly