This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. ASSA Annual Meeting
  3. 2023
  4. Program
  5. Monetary Policy and Financial Stability: Effects and Implications
« Back to Results

Monetary Policy and Financial Stability: Effects and Implications

Paper Session

Saturday, Jan. 7, 2023 12:30 PM - 2:15 PM (CST)

Sheraton New Orleans, Edgewood AB
Hosted By: International Banking, Economics, and Finance Association
  • Chair: Annette Vissing-Jørgensen, Federal Reserve Board

Estimating the Fed's Unconventional Policy Shocks

Marek Jarocinski
,
European Central Bank

Abstract

Fed monetary policy announcements convey a mix of news about different conventional and unconventional policies, and about the economy. Financial market responses to these announcements are often tiny, but sometimes very large. I estimate the underlying structural shocks exploiting this feature of the data, both assuming that the structural shocks are independent and relaxing this assumption. Either approach yields the same four tightly estimated shocks that can be naturally labeled as standard monetary policy, Odyssean forward guidance, large scale asset purchases and Delphic forward guidance.

Unexpected Supply Effects of Quantitative Easing and Tightening

Stefania D'Amico
,
Federal Reserve Bank of Chicago
Tim Seida
,
Northwestern University

Abstract

To analyze the evolution of quantitative easing's (QE) and tightening's (QT) effects across consecutive announcements, we focus on their unexpected component. Treasury yield sensitivities to QE and QT supply surprises do not fall monotonically over time, thus later announcements seemed to remain powerful; yield sensitivities to QT surprises are on average larger than sensitivities to QE surprises, implying supply effects did not diminish during periods of market calm amid economic expansion; finally, yield sensitivities are amplified by the amount of interest-rate uncertainty prevailing before the announcement, implying that turning points in the balance sheet policy tended to elicit larger reactions.

Quantitative Easing, Bank Lending, and Macroprudential Regulation

Andrea Orame
,
Bank of Italy
Rodney Ramcharan
,
University of Southern California
Roberto Robatto
,
University of Wisconsin-Madison

Abstract

We study whether time-varying macroprudential regulation that relies on historical cost accounting (HCA) to insulate banks’ net worth from financial market volatility—a policy widely used in the European Union—impairs the transmission of quantitative easing (QE) through the bank lending channel. Using detailed supervisory data from Italian banks and taking advantage of a shift in the macroprudential regime, we find that HCA significantly mutes the impact of QE. Our results suggest that, while HCA-based macroprudential regulation can insulate banks’ balance sheets during periods of distress, it also impairs the effectiveness of monetary policy in reducing firm credit constraints.

Corporate Legacy Debt, Inflation, and the Efficacy of Monetary Policy

Charles A.E. Goodhart
,
London School of Economics and CEPR
M. Udara Peiris
,
Oberlin College
Dimitrios P. Tsomocos
,
University of Oxford
Xuan Wang
,
Vrije Universiteit Amsterdam and Tinbergen Institute

Abstract

TBD

Discussant(s)
Eric Swanson
,
University of California-Irvine
Signe Krogstrup
,
Danish National Bank
Benoit Nguyen
,
Bank of France
Mark Jansen
,
University of Utah
JEL Classifications
  • E4 - Money and Interest Rates
  • E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit