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The Macroeconomic Effects of Large-scale Asset Purchase Programmes


  • Corresponding author: Vasco Cúurdia, Federal Reserve Bank of New York, 33 Liberty Street, 3rd Floor, NY 10045, New York. Email:

  •  This article was prepared for the conference ‘Learning the Lessons from QE and Other Unconventional Monetary Policies’, which took place at Bank of England on 17–18 November 2011. Special thanks to Andrew Scott (the editor) and an anonymous referee for their extremely valuable suggestions, Richard Harrison for his discussion at the conference and the conference participants for their comments. We have also benefited from comments by Hal Cole, Frank Diebold, Stefano Eusepi, John Fernald, Keith Kuester, James Nason, Ed Nelson, Ricardo Reis, Glenn Rudebusch, Frank Schorfheide, Eric Swanson, Michael Woodford and seminar participants at the University of Pennsylvania, Federal Reserve Banks of New York, Philadelphia and San Francisco, University of California Santa Cruz and the European Economic Association 2011 Meetings in Oslo. The views expressed in this article are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System.


We simulate the Federal Reserve second Large-Scale Asset Purchase programme in a DSGE model with bond market segmentation estimated on US data. GDP growth increases by less than a third of a percentage point and inflation barely changes relative to the absence of intervention. The key reasons behind our findings are small estimates for both the elasticity of the risk premium to the quantity of long-term debt and the degree of financial market segmentation. Without the commitment to keep the nominal interest rate at its lower bound for an extended period, the effects of asset purchase programmes would be even smaller.