Unconventional Monetary Policy Had Large International Effects
Federal Reserve Bank of St. Louis Working Paper No. 2010-018F
50 Pages Posted: 7 Jul 2010 Last revised: 23 Sep 2014
Date Written: September 22, 2014
The Federal Reserve’s unconventional monetary policy announcements in 2008-2009 substantially reduced international long-term bond yields and the spot value of the dollar. These changes closely followed announcements and were very unlikely to have occurred by chance. A simple portfolio choice model can produce quantitatively plausible changes in U.S. and foreign excess bond yields. The jump depreciations of the USD are fairly consistent with estimates of the impacts of previous equivalent monetary policy shocks. The policy announcements do not appear to have reduced yields by reducing expectations of real growth. Unconventional policy can reduce international long-term yields and the value of the dollar even at the zero bound.
Keywords: Large scale asset purchase, quantitative easing, event study, monetary policy, zero bound
JEL Classification: G12, E34, E58, E61, F31
Suggested Citation: Suggested Citation