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The Effect of the Federal Reserve’s Securities Holdings on Longer-Term Interest Rates

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Abstract

In an effort to promote more accommodative financial conditions following the financial crisis of 2008 and the ensuing recession, and at a time when the conventional monetary policy tool--the federal funds rate--was at its effective lower bound, the Federal Reserve conducted large-scale asset purchases (LSAPs) and a maturity extension program (MEP). This note outlines a way to estimate by how much Federal Reserve securities holdings resulting from these purchase programs reduce longer-term interest rates. In this note, we focus on another channel through which LSAPs may affect the economy: the portfolio balance channel.

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  • Brian Bonis & Jane E. Ihrig & Min Wei, 2017. "The Effect of the Federal Reserve’s Securities Holdings on Longer-Term Interest Rates," FEDS Notes 2017-04-20-1, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfn:2017-04-20-1
    DOI: 10.17016/2380-7172.1977
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    Cited by:

    1. Edward Gamber & John Seliski, 2019. "The Effect of Government Debt on Interest Rates: Working Paper 2019-01," Working Papers 55018, Congressional Budget Office.
    2. Stefania D'Amico & Max Gillet & Sam Schulhofer-Wohl & Tim Seida, 2024. "Open-Ended Treasury Purchases: From Market Functioning to Financial Easing," Working Paper Series WP 2024-08, Federal Reserve Bank of Chicago.
    3. Christian Pfister & Jean-Guillaume Sahuc, 2020. "Unconventional monetary policies: A stock-taking exercise," Revue d'économie politique, Dalloz, vol. 130(2), pages 137-169.
    4. Martin Motl, 2019. "The inverted yield curve in the USA: How much time is left until a recession?," Occasional Publications - Chapters in Edited Volumes, in: CNB Global Economic Outlook - May 2019, pages 13-19, Czech National Bank.
    5. Eterovic, Dalibor & Sweet, Cassandra & Eterovic, Nicolas, 2022. "Asymmetric spillovers in emerging market monetary policy," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 650-662.
    6. Sangyong Joo & Daehwan Kim & Jeffrey Nilsen, 2021. "Monetary Policy and Long-Term Interest Rates in Korea: A Decomposition Analysis," Korean Economic Review, Korean Economic Association, vol. 37, pages 327-366.
    7. Willem Thorbecke, 2021. "Non-traditional monetary policy and the future of the financial industries," International Journal of Economic Policy Studies, Springer, vol. 15(1), pages 5-21, February.
    8. International Monetary Fund, 2017. "Philippines: Selected Issues," IMF Staff Country Reports 2017/335, International Monetary Fund.

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