A Structural Investigation of Quantitative Easing

107 Pages Posted: 10 Feb 2021

See all articles by Gregor Boehl

Gregor Boehl

University of Bonn

Gavin Goy

De Nederlandsche Bank

Felix Strobel

Deutsche Bundesbank

Multiple version iconThere are 2 versions of this paper

Date Written: 2021

Abstract

Did the Federal Reserve's Quantitative Easing (QE) in the aftermath of the financial crisis have macroeconomic effects? To answer this question, we estimate a large-scale DSGE model over the sample from 1998 until 2020, including data of the Fed's balance sheet. We allow for QE to affect the economy via multiple channels that arise from several financial frictions. Our nonlinear Bayesian likelihood approach fully accounts for the zero lower bound on nominal interest rates. We find that QE increased output by about 1.2 percent, reflecting a net increase in investment of nearly 9 percent accompanied by a 0.7 percent drop in aggregate consumption. Both government bond and capital asset purchases effectively improved financing conditions. Especially capital asset purchases significantly facilitated new investment and increased the production capacity. Against the backdrop of a fall in consumption, supply side effects dominated, leading to a disinflationary effect of about 0.25 percent annually.

JEL Classification: C62, C63, E32, E58, E63

Suggested Citation

Boehl, Gregor and Goy, Gavin and Strobel, Felix, A Structural Investigation of Quantitative Easing (2021). Deutsche Bundesbank Discussion Paper No. 01/2021, Available at SSRN: https://ssrn.com/abstract=3782958

Gregor Boehl (Contact Author)

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

Gavin Goy

De Nederlandsche Bank ( email )

Westeinde 1
1017 ZN Amsterdam
Netherlands

HOME PAGE: http://https://www.dnb.nl

Felix Strobel

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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