Expansionary monetary policy is ineffective in a liquidity trap. In another case, which we call a “reserve trap,” money supply increase is trapped in bank reserves; there is no credit expansion through the banking system. In such case, quantitative easing (QE) will not boost credit to the...

Using post-1995 Japanese data we propose a new sign restriction SVAR approach to identify monetary policy shocks when the economy is at the Zero Lower Bound (ZLB). The identifying restrictions are based on predictions of Eggertsson's (2010) New Keynesian DSGE models when the economy is stuck at...

Before the era of large central bank balance sheets, banks relied on incoming payments to fund outgoing payments in order to conserve scarce liquidity. Even in the era of large central bank balance sheets, rather than funding payments with abundant reserve balances, we show that outgoing...

We conduct a systematic analysis of the costs and benefits of large-scale securities purchases, using the Federal Reserve's QE4 program as a concrete example. This program was initiated at the onset of the pandemic in March 2020 and continued for two years, leading to a doubling of the Fed's...

I separately identify and estimate the effects of the Federal Reserve's federal funds rate, forward guidance, and large-scale asset purchase (LSAP) policies on the U.S. economy. I extend the high-frequency identification strategy of Bauer and Swanson (2023b) for monetary policy VARs by allowing...

In response to the Great Financial Crisis, the Federal Reserve, the Bank of England and many other central banks have adopted unconventional monetary policy instruments. We investigate if one of these, purchases of long-term government debt, could be a valuable addition to conventional...

This paper investigates the effectiveness of the ‘quantitative easing’ policy, as officially implemented by the Bank of England since March 2009. A policy of the same name had previously been implemented in Japan, which serves as a reference. While the majority of the previous literature has...

Beginning in October 2011, the Federal Reserve began ongoing purchases of Mortgage Backed Securities (MBS). I test the extent to which these purchases were associated with disruptions in indicators of market functioning by using daily data on Federal Reserve MBS purchase operations. I find that...

A number of debates are taking place regarding the appropriate response of monetary policy both to the crisis and the Great Recession that followed, particularly in regard to interest on reserve balances and so-called unconventional monetary policy operations. This paper describes in detail an...

From the beginning of 2003 to the spring of 2004, Japan’s monetary authorities conducted large-scale yen-selling/dollar-buying operations in what Taylor (2006) has labeled the “Great Intervention.” This paper examines the relationship between this “Great Intervention” and the...