Does Quantitative Easing Lower the Long-Term Interest Rates?

12 Pages Posted: 30 Sep 2019

See all articles by Nguyen Do

Nguyen Do

Institute of Economics and Finance, Academy of Finance

Date Written: September 19, 2019

Abstract

There is a consensus that during the Great Recession period quantitative easing puts downward pressure on long-term interest rates. Using quarterly data and vector autoregressive model this note provides empirical evidence that quantitative easing, measured by changes in monetary base as a percentage of gross domestic product, instead, positively affects the U.S. 10-year government bond yield. One possible explanation for this is that increasing the size of the Federal Reserve balance sheets raises optimism about the macroeconomy.

Keywords: Bond Interest Rates; Monetary Policy; QE

JEL Classification: E43; E52; G12

Suggested Citation

Do, Nguyen, Does Quantitative Easing Lower the Long-Term Interest Rates? (September 19, 2019). Available at SSRN: https://ssrn.com/abstract=3456424 or http://dx.doi.org/10.2139/ssrn.3456424

Nguyen Do (Contact Author)

Institute of Economics and Finance, Academy of Finance ( email )

162 Nguyen Van Cu Street, Long Bien District
Hanoi, 100000
Vietnam

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