Effects of the Fed's Liquidity Programs and Quantitative Easing on Interest Rates, 2007-2010
29 Pages Posted: 4 Nov 2015
Date Written: November 1, 2012
This paper examines the effectiveness of several of the Fed’s unconventional monetary policies from 2007 to 2010 by comparing interest rate spreads with forecast estimates based on either the pure expectations hypothesis or the preferred habitat theory. We find that the effectiveness of these policies are similar to other studies in that the liquidity provided by the Fed did not have immediate or significant effects on interest rate spreads. These results are consistent with several studies that point toward counter party risk, not lack of liquidity, as the problem in financial markets at the time.
Keywords: Quantitative Easing, Preferred Habitat Theory, Pure Expectations Hypothesis
JEL Classification: E43, E47, E52
Suggested Citation: Suggested Citation