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A Survey of the Empirical Literature on U.S. Unconventional Monetary Policy (2016)

September 2, 2018 Bilal 0 Abstract: This paper reviews and critically evaluates the empirical literature on the effects of U.S. unconventional monetary policy on both financial markets and the real economy. In order to understand how such policies could work, we also briefly review the literature on the theory of such policies. We show that event studies provide very strong evidence that U.S. unconventional policy announcements have strongly influenced international bond yields, exchange rates, and equity prices in the desired manner. In addition, such studies indicate that such policies curtailed market perceptions of extreme events. Calibrated modeling and vector autoregressive (VAR) exercises strongly suggest […]

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When Did the FOMC Begin Targeting the Federal Funds Rate? What the Verbatim Transcripts Tell Us

September 2, 2018 Bilal 0 Abstract In October 1982 the FOMC deemphasized M1 and moved to what is commonly referred to as a borrowed reserves operating procedure. Sometime thereafter the FOMC switched to a funds rate targeting procedure but never formally announced the change. Given the close correspondence between a borrowed reserves operating procedure and a funds rate targeting procedure, Thornton (1988) suggested that the FOMC went immediately to a funds rate targeting procedure. Others date the switch to the funds rate procedure later. Meulendyke (1998) suggests the switch came in late 1987, while others suggest the change occurred later. This paper reviews the […]

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Predictable movements in asset prices around FOMC meetings

September 2, 2018 Bilal 0

Predictable movements in asset prices around FOMC meetings The real effects of monetary policy are still heavily debated because monetary policy affects real quantities, such as employment or GDP growth, with a delay. For this reason, to understand the transmission mechanisms of monetary policy, researchers have studied the response of financial markets in narrow windows around monetary policy actions.  Monetary policy has large and immediate effects on stock markets. Bernanke and Kuttner (2005) show that a contractionary monetary policy shock of 25 basis points created a drop in broad stock indices of more than 1 percentage point within minutes […]