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Shall we twist?

Author

Listed:
  • Sophie Altermatt
  • Dr. Simon Beyeler

Abstract

We study the implementation and effectiveness of Operation Twist, which represents the origin of today's unconventional monetary policy measures. Operation Twist serves as a perfect laboratory to assess the usefulness of such balance sheet policies because at that time interest rates were not at their lower bound and the economy was not in a historic turmoil. We assess the actions of the Fed and the Treasury under Operation Twist based on balance sheet data and evaluate the success of the operation using modern time series techniques. We find that the joint policy actions, despite being of rather moderate scale, were effective in compressing the long-short spreads of Treasury bond rates.

Suggested Citation

  • Sophie Altermatt & Dr. Simon Beyeler, 2020. "Shall we twist?," Working Papers 2020-11, Swiss National Bank.
    • Handle: RePEc:snb:snbwpa:2020-11
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    File URL: https://www.snb.ch/en/publications/research/working-papers/2020/working_paper_2020_11
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Operation Twist; monetary policy; interest rates; yield curve; time series;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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