Financial market effects of large-scale asset purchases (LSAPs)

Financial yield or price Assumed LSAP effect General range in survey literature
10-year Treasury interest rates 100 basis-point decrease 38–150 basis points for QE1; more mixed results for QE2; very few direct estimates of QE3 extant.
10-year mortgage-backed security rates 150 basis-point decrease Gagnon et al. (2011) and Krishnamurthy and Vissing-Jorgensen (2011) find larger impacts on non-Treasury rates. Rough ratios from their papers are applied to Treasury rate above.
10-year bond prices 9–14 percent increase Price increase estimate is given a starting interest rate of 3 percent on a 10-year bond, then assumes a 100–150 basis point decline.
Equity prices 5 percent increase Price increase estimates range from <3 percent in Dobbs et al. (2013) to 8.5 percent in Engen (2014).
Home prices 7 percent increase Estimate is constructed from existing literature on elasticity of home prices to long-term rates. Also in line with Dobbs et al. (2013) finding.

Source: Adapted from Josh Bivens, “Gauging the Impact of the Fed on Inequality During the Great Recession,” Hutchins Center on Fiscal & Monetary Policy at Brookings, Working Paper no. 12, June 2015. For sources referred to in the table, refer to “Extended source” in the online version of this table.

Sources referred to in the table are: Joseph Gagnon, Matthew Raskin, Julie Remache, and Brian Sack, "The Financial Market Effects of the Federal Reserve’s Large-Scale Asset Purchases," International Journal of Central Banking, vol. 7, no. 1, 3–43 (2011); Arvind Krishnamurthy and Annette Vissing-Jorgensen, “The Effects of Quantitative Easing on Interest
Rates: Channels and Implications for Policy,” Brookings Papers on Economic Activity, 215 (2011); Richard Dobbs, Susan Lund, Tim Koller, and Ari Shwayder, “QE and Ultra-Low Interest Rates: Distributional Effects and Risks,” Discussion Paper, Mckinsey Global Institute (2013); and Eric M. Engen, Thomas T. Laubach, and David Reifschneider, “The Macroeconomic Effects of the Federal Reserve’s Unconventional Monetary Policies,” Finance and Economic Discussion Series
2015–005, Board of Governors of the Federal Reserve System (2015).

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