Effects of the Fed's Liquidity Programs and Quantitative Easing on Interest Rates, 2007-2010

29 Pages Posted: 4 Nov 2015

See all articles by Ronald D. Gilbert

Ronald D. Gilbert

Texas Tech University

Vance Ginn

Texas Public Policy Foundation

Date Written: November 1, 2012

Abstract

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

Gilbert, Ronald D. and Ginn, Vance, Effects of the Fed's Liquidity Programs and Quantitative Easing on Interest Rates, 2007-2010 (November 1, 2012). Available at SSRN: https://ssrn.com/abstract=2685761 or http://dx.doi.org/10.2139/ssrn.2685761

Ronald D. Gilbert

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Vance Ginn (Contact Author)

Texas Public Policy Foundation ( email )

901 Congress Avenue
Austin, TX 78701
United States
7134785255 (Phone)

HOME PAGE: http://www.texaspolicy.com/experts/detail/vance-ginn

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