Macroeconomic Effects of Large-Scale Asset Purchases: New Evidence

Abstract

We provide new evidence on the macroeconomic effects of the Federal Reserve's large-scale asset purchases (LSAPs), using a structural VAR with survey-based measures of the LSAP policy stance and instruments constructed from high-frequency yield changes. We estimate that, at the peak, a $500 billion LSAP shock raises output and the price level by about 1.2 percent and 0.8 percent, respectively, while reducing the unemployment rate by 0.5 percentage points. These results are robust to considering possible central bank information effects and allowing for an endogenous switch between the interest rate and the balance sheet tool at the effective lower bound.