How large-scale asset purchase (LSAP) programs affect financial markets is an important question for policy makers that face the zero lower bound. While so-called “stock effects”–that is, persistent shifts in asset prices observed as the result of an LSAP program–are relatively well...

In this paper, we document that mortgage-backed securities (MBS) held by the Federal Reserve exhibit faster principal prepayment rates than MBS held by the rest of the market. Next, we show that this stylized fact persists even when controlling for factors that affect prepayment behavior, and...

In this paper, we document that mortgage-backed securities (MBS) held by the Federal Reserve exhibit faster principal prepayment rates than MBS held by the rest of the market. Next, we show that this stylized fact persists even when controlling for factors that affect prepayment behavior, and...

We exploit an exogenous reduction in bank supervision to demonstrate a causal effect of supervisory resources on financial institutions' willingness to take risk. The additional risk took the form of more risky loans, faster asset growth, and a greater reliance on low quality capital. This...

We empirically test early monetary theories in which reserve creation plays a crucial role in the transmission of quantitative easing (QE). Analyzing the unprecedented injection of reserves across several Federal Reserve QE programs, we demonstrate a causal effect of bank-level reserve...

How large-scale asset purchase (LSAP) programs affect financial markets is an important question for policy makers that face the zero lower bound. In this paper, we analyze so-called “flow effects” that may occur at the time of LSAP transactions. Using security-level transaction data related...

In this paper, we exploit a natural experiment in which thrifts in several states witnessed an exogenous reduction in supervisory attention to assess the effect of supervision on financial institutions' willingness to take risk. We show that the affected institutions took on much more risk than...

We empirically assess the effect of reserve accumulation as a result of quantitative easing (QE) on bank-level lending and risk taking activity. To overcome the endogeneity of bank-level reserve holdings to banks' other portfolio decisions, we employ instruments made available by a regulatory...