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Unconventional monetary policy had large international effects

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  • Neely, Christopher J.

Abstract

The Federal Reserve’s unconventional monetary policy announcements in 2008–2009 substantially reduced international long-term bond yields and the spot value of the dollar. These changes closely followed announcements and were very unlikely to have occurred by chance. A simple portfolio choice model can produce quantitatively plausible changes in U.S. and foreign excess bond yields. The jump depreciations of the USD are fairly consistent with estimates of the impacts of previous equivalent monetary policy shocks. The policy announcements do not appear to have reduced yields by reducing expectations of real growth. Unconventional policy can reduce international long-term yields and the value of the dollar even at the zero bound.

Suggested Citation

  • Neely, Christopher J., 2015. "Unconventional monetary policy had large international effects," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 101-111.
    • Handle: RePEc:eee:jbfina:v:52:y:2015:i:c:p:101-111
    DOI: 10.1016/j.jbankfin.2014.11.019
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    More about this item

    Keywords

    Large scale asset purchase; Quantitative easing; Event study; Monetary policy; Zero bound;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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