Assessing the Fed's Tools at the Zero Lower Bound

摘要

From 2009 to 2015, when the Federal Reserve's target short-term interest rate was close to zero, the central bank employed two other mechanisms in its efforts to boost the economy: forward guidance -- information about the future path of the short-term interest rate -- and large-scale asset purchases (LSAPs). In Measuring the Effects of Federal Reserve Forward Guidance and Asset Purchases on Financial Markets (NBER Working Paper No. 23311), Eric T. Swanson reports that both tools had substantial impacts on medium-term Treasury yields, stock prices, and the value of the dollar -- impacts not unlike those achieved by changes to the federal funds rate before 2009. Short-term Treasury yields responded more to forward guidance, while LSAPs had a more pronounced effect on longer-term Treasury and corporate bond yields, his study finds. The effects of LSAPs also seem to have been more persistent.