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The concept of trusts, absent from the classical writings of Marx and Weber on capitalism, was introduced by Frederic Maitland and John Locke as an explanatory framework for the central institutions of capitalism. While these two theorists offered compelling arguments, they relied on intuition and utilized the concept primarily to justify the existing social structure. This paper aims to bring analytical rigor to this intuitive theory and proposes that critical theory embraces the idea of trusts as a critical conceptual tool to unravel the nature of capitalist institutions. Examining limited liability corporations, the modern state, and public debt, the incorporation of trusts into critical theory provides key advantages. First, it facilitates analyzing capitalist institutions in terms of rights and responsibilities, unveiling moral dynamics. Second, it highlights the role of personhood in distributing rights and responsibilities. Third, it can help understand why modern society is ensnared by the shackles of debt. [ABSTRACT FROM AUTHOR]

We analyze the impact of quantitative easing (QE) on economic sentiment variables (business and consumer confidence, uncertainty, and volatility) within three large and advanced economies (Europe, Japan, and the US), an area which has been left relatively unexamined. We observe a strong response of the economic sentiment variables in the US to a QE shock. Over a longer time-horizon, the forecast error variance decompositions show that the US is the only economy where the QE shock accounts for a large and persistent portion of the variance in the economic sentiment variables across the different specifications used. The shocks in Japan and Europe tend to account for a very small amount of the variance in the corresponding variables, even at longer time horizons. [ABSTRACT FROM AUTHOR]

This study investigates the influence of central bank private-sector quantitative easing (QE) policies on firms' voluntary disclosures. While the effects of QE on borrowing costs and asset prices are well documented, spillovers in the disclosure realm remain understudied. This study specifically analyzes the effects of the Corporate Sector Purchase Program (CSPP), a private-sector QE policy implemented by the European Central Bank (ECB) in 2016 targeting corporate bonds in the euro area. Applying a difference-in-differences methodology to pre- and post-CSPP periods, I find that firms whose bonds the central bank purchased under the CSPP decreased their voluntary disclosures, particularly those related to cash flows and liabilities. My analysis attributes this decrease to reduced demand for firm-specific information from the central bank. My findings highlight the indirect consequences of QE monetary policy tools on corporate disclosure and contribute to the understanding of the transmission of monetary policy and investor-clientele dynamics. [ABSTRACT FROM AUTHOR]

This study utilizes two complementary models, the Time-Varying Parameter Vector Autoregressive Diebold–Yilmaz (TVP-VAR-DY) and the Time-Varying Parameter Vector Autoregressive Baruník–Křehlík (TVP-VAR-BK), to investigate the dynamic volatility transmission between exchange rates and stock returns in major commodity-exporting and -importing countries. The analysis focuses on periods of quantitative easing (QE) and quantitative tightening (QT) from March 15, 2020 to December 30, 2022. The countries examined are Canada and Australia (major commodity exporters) and the UK and Germany (major commodity importers). An essential contribution of this paper is new empirical insights into the dynamics of stock market returns and the transmission of volatility between these markets and exchange rates during the QE and QT periods. The results reveal that causality primarily flows from stock markets to exchange rates, especially during the QT period across all investment horizons. The Toronto Stock Exchange (TSX) emerges as the principal net driver among the markets under study. Furthermore, the Canadian exchange rate (USDCAD) and the Australian Stock Exchange (ASX) are the most significantly affected indices within the network across various investment horizons (excluding the long-term). These findings underscore the importance for investors and policymakers to consider the interplay between exchange rates and stock market returns, particularly in the context of the QE and QT periods, as well as other economic, political, and health-related events. Our findings are relevant to various stakeholders, including governments, traders, portfolio managers, and multinationals. [ABSTRACT FROM AUTHOR]

We assess the impact of quantitative easing (QE) on the provision of liquidity and pricing in the UK gilt repo market. We compare the behaviour of banks that received reserve injections via QE operations to other similar banks in terms of the amounts lent and pricing. We also investigate whether leverage ratio capital requirements affected the amounts of liquidity supplied by broker-dealers and the spreads they charged. We find that QE interventions can improve liquidity provision and that their size determines how this is attained. QE can also reduce the cost of borrowing in the repo market unless it is associated with spikes in demand for liquidity. Our findings indicate that the leverage ratio supports the provision of liquidity during stress, as it prompts banks to become less leveraged. However, the larger capital charge repo transactions attract under the leverage ratio requirements reflects on the spreads these banks charge. [ABSTRACT FROM AUTHOR]

During episodes of severe depression, interest rates can approach the zero lower bound (ZLB) and stay there for a fairly long time. Mainstream macroeconomic theory (the so-called New Consensus Economics) then fails to provide adequate guidance under a Taylor type rule to conventional monetary policy. Various alternatives have been suggested to revitalise monetary policy in such a situation. The major alternatives can be divided into three categories, namely, (a) those that do not recognise the ZLB as an effective floor, (b) those based on the Keynesian liquidity trap and (c) those based (implicitly) on Hawtrey's credit deadlock. We discuss these alternatives with a special focus on quantitative easing (QE). In particular, we draw attention to the largely ignored fact that QE had been suggested by the British economist Hawtrey at least as early as 1931 in the policy debates on ways to emerge from the Great Depression. JEL Codes: E4, E5, N1 [ABSTRACT FROM AUTHOR]

Abstract This study utilizes two complementary models, the Time-Varying Parameter Vector Autoregressive Diebold–Yilmaz (TVP-VAR-DY) and the Time-Varying Parameter Vector Autoregressive Baruník–Křehlík (TVP-VAR-BK), to investigate the dynamic volatility transmission between exchange rates and stock returns in major commodity-exporting and -importing countries. The analysis focuses on periods of quantitative easing (QE) and quantitative tightening (QT) from March 15, 2020 to December 30, 2022. The countries examined are Canada and Australia (major commodity exporters) and the UK and Germany (major commodity importers). An essential contribution of this paper is new empirical insights into the dynamics of stock market returns and the transmission of volatility between these markets and exchange rates during the QE and QT periods. The results reveal that causality primarily flows from stock markets to exchange rates, especially during the QT period across all investment horizons. The Toronto Stock Exchange (TSX) emerges as the principal net driver among the markets under study. Furthermore, the Canadian exchange rate (USDCAD) and the Australian Stock Exchange (ASX) are the most significantly affected indices within the network across various investment horizons (excluding the long-term). These findings underscore the importance for investors and policymakers to consider the interplay between exchange rates and stock market returns, particularly in the context of the QE and QT periods, as well as other economic, political, and health-related events. Our findings are relevant to various stakeholders, including governments, traders, portfolio managers, and multinationals.

This study presents a comprehensive analysis of the effects and challenges of quantitative easing as a monetary policy tool in Japan. Over a period of more than two decades, Japan has implemented quantitative easing to stimulate its economy, resulting in a unique economic landscape characterized by both short-term benefits and long-term uncertainties. By examining historical developments, recent economic trends, and potential risks, this research sheds light on the complex interplay between monetary policy and economic outcomes in Japan.This academic study will provide a comprehensive analysis of the effects and challenges of quantitative easing in Japan, focusing on both short-term benefits and long-term consequences. It will also examine recent economic trends and potential risks to the Japanese economy, offering insights and recommendations for policymakers while acknowledging the uncertainties surrounding the long-term effects of this monetary policy.

Quantitative Easing (QE) has become a critical monetary policy tool, particularly after the 2008 Financial Crisis and the COVID-19 pandemic, aimed at stimulating economic activity through large-scale bond purchases. QE raises asset prices, lowers interest rates, and enhances market liquidity, but its long-term effects on financial stability and instruments like Contingent Convertible (CoCo) bonds are less understood. This study explores how QE indirectly impacts CoCo bond activation by influencing banks’ capital adequacy. Using the 2023 Credit Suisse crisis as a case study, we model how QE reshapes bank capital structures, increasing CoCo activation risks during financial instability.

In the context of the studies of income and wealth distribution, this paper explores evidence to what extent recent monetary policy had distribution effects. This research utilizes the Federal Reserve Board's Survey of Consumer Finances to identify at least two sub populations and follow their dynamics as monetary policy moved from conventional interest rate setting to unconventional Quantitative Easting policy. This is achieved through use of Weighted Expectation Maximization Cluster Modeling, and the Malhalanobis Distance between cluster means. This approach is used to study volatility and bifurcation in distributions of capital gains and incomes to U.S. households through the Financial Crisis and Sars-CoV-2 pandemic. [ABSTRACT FROM AUTHOR]

Copyright of International Journal of Business & Development Studies is the property of University of Sistan & Baluchestan and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper constructs a survey‐based measure capturing the evolution of market's expectations of the Federal Reserve's Large‐Scale Asset Purchases (LSAP) program during 2008–18, and examines the transmission mechanism of unconventional monetary policy. Estimation results suggest that both signaling and portfolio balance channels of the LSAP were important in lowering long‐term interest rates; Moreover, the Federal Reserve's forward guidance policy had led to a gradual extension of market's projections of the duration of the LSAP, making its effects more persistent. Model estimation also explains the 2013 taper tantrum well, and suggests that the LSAP's effects might have declined during QE III. [ABSTRACT FROM AUTHOR]

Using a panel quantile vector autoregression model, we investigate the global liquidity effect of quantitative easing (QE) in the US on emerging markets (EMs) over the period 2010:Q1 to 2019:Q3. Our empirical result suggests that tapering of QE in the US triggers a large capital outflow from the EMs. In addition, we find a significant asymmetric effect of QE on portfolio investment flows to EMs with a stronger effect in the higher quantiles. The implication of these findings is that tapering the large-scale asset purchases and other instruments of unconventional monetary policy have a larger effect on EMs. [ABSTRACT FROM AUTHOR]

This paper studies how macroeconomic news affected the spreads of Italian sovereign bonds before and during the quantitative easing by the European Central Bank. Daily changes in the bond spreads are regressed on macroeconomic news shocks, where the news shocks are computed as the difference between the published data and the preceding private-sector forecasts. The analysis shows that macroeconomic news shocks had economically and statistically significant effects on Italian bond spreads in 2012–2014 before quantitative easing, while the effects were negligible afterwards although with a partial exception of a period in 2019 when the net asset purchases were paused. [ABSTRACT FROM AUTHOR]

Copyright of Izmir Journal of Economics is the property of Dokuz Eylul University, Faculty of Economics & Administrative Sciences and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Identifying the effects of quantitative easing (QE) on asset return correlations is critical to assessing such policies' impact across financial markets. In this paper, we use a dynamic conditional correlation model that allows us to measure the impact of unconventional monetary policy on time‐varying correlations. Our results suggest that QE significantly affected correlations between stocks and bonds after the Great Recession via short‐term portfolio balance effects. The findings are critical for policy‐makers and practitioners alike. Central banks should consider the impact of monetary policy on asset correlations in their cost–benefit analyses. Likewise, portfolio managers are encouraged to factor in the effects of monetary policy on correlations to optimize portfolios and reduce potential losses strategically. [ABSTRACT FROM AUTHOR]

The economic institutionalist literature often suggests that sub-optimal institutional arrangements impart unique distortions in China, and excessive corporate debt is a symptom of this condition. However, lax monetary policies after the global financial crisis, and specifically, quantitative easing have led to concerns about debt bubbles under a wide range of institutional regimes. This study draws on data from Chinese listed firms, supplemented by numerous macroeconomic control variables, to isolate the effect of international capital flows from other drivers of firm leverage. We conclude that the rise in, and distribution of, Chinese corporate debt can partly be ascribed to the effects of monetary policy outside of China and that Chinese institutional features amplify these effects. Whilst Chinese firms are affected by developments in the global financial ecosystem, domestic institutional realities and distortions may unevenly add their own particular effects, providing further support for and extending the variegated capitalism literature. [ABSTRACT FROM AUTHOR]

This paper evaluates the relationship between monetary and fiscal policy and the relative effectiveness of macroeconomic stabilization through the lens of Modern Money Theory (MMT). We articulate previously-neglected aspects of monetary sovereignty to offer a new interpretation of the Bernanke Doctrine that emerged in the wake of the 2008 Global Financial crisis. This Doctrine validated key MMT precepts and paved the way for fiscal policy activism in response to COVID19. The paper argues that fiscal and monetary policy coordination is not new or rare. It is an intrinsic feature of sovereign monetary regimes, allowing for more effective policy responses to financial crises or pandemics. To the extent that monetary policy is able to stabilize an unstable economy, it is largely due to its fiscal components. This recognition also calls for a rethinking of fiscal policy. [ABSTRACT FROM AUTHOR]

This study investigates the impact of Central Bank interventions on the pricing dynamics of select stock markets. The research utilizes the instrumental variables three-stage least square (3SLS) model approach. It analyses the effects of variations in the Federal Reserve's balance sheet size across three distinct intervention scenarios: the 2008–2013 Great Recession, the 2020–2021 COVID-19 pandemic periods, and an overarching analysis spanning these timelines. Our methodology includes estimations of the Seemingly Unrelated Regression Equations (SURE), and the results are robust under the two-step Generalized Method of Moments (GMM). Our findings indicate that changes in the size of the Fed's balance sheet correlate significantly with the pricing of principal U.S. equity market indices. This correlation reflects a time-dependent effect emanating from the Fed's balance sheet expansion, marking a growing divergence between the adaptability of pricing mechanisms in equity and debt markets. Notably, the Federal Reserve's interventions during the COVID-19 crisis are associated with an increase of approximately 0.0403 basis points per billion in treasury yields. This research makes a significant contribution to the understanding of financial asset pricing, particularly by elucidating the extent to which interventions in government debt securities engender price distortions in certain equity markets. [ABSTRACT FROM AUTHOR]

This paper analyzes the effects of central bank interventions via large-scale purchases of government debt securities on the pricing of stock market indices. This study examines the effects of changes in the size of the Federal Reserve's balance sheet in three intervention scenarios: during the 2008–2013 period, the 2020–2022 period, and in the years between by using the instrumental variables three-stage least squares (3SLS) method for a time series approach, and calculates the effects of these interventions on each index in a fund of funds setup using the panel data strategy. This study confirms that large-scale purchases of government debt securities in response to the Great Recession and COVID-19 crises influenced the pricing of equity markets via their effect on the pricing of treasury bonds, with different degrees of sensitivity of each index to the effects on yields. Although the findings apply to the U.S. market, the results indicate that the pricing of small capitalization indices such as the Russell 2000 are less sensitive to changes in treasury yields caused by central bank interventions than large capitalization indices such as the DJIA. This research contributes to the understanding of financial asset pricing, particularly by identifying price distortions within equity market portfolios. [ABSTRACT FROM AUTHOR]

Studying monetary authority response to macroeconomic imbalances using the interest rate as a proxy variable for monetary policy became ineffective after the financial crisis, when central banks exhausted the effective capacity of interest rates by reaching the zero lower bound (ZLB). In an effort to analyse the unconventional response deployed by central banks, we present and estimate a modified reaction function that uses money supply as the operational instrument of monetary policy for the Federal Reserve and the European Central Bank, and we verify its utility as an explanatory instrument for the behaviour of the two monetary authorities. By applying our strategy, it is feasible to identify both monetary policy reaction with regard to the economic situation as well as other possible monetary authority concerns regarding governments' fiscal behaviour and the evolution of asset markets, regardless of the monetary policy applied at any given time. [ABSTRACT FROM AUTHOR]

This article aims to investigate the anti-crisis reforms of the monetary policy of the Federal Reserve System (FRS) of the United States during the global financial crisis, the pandemic period, and the worsening of the military conflict in Ukraine. The study showed a significant decline in inflation due to the reduced demand for goods and services in the first two crises. Under these conditions, the Fed needed unprecedented measures to soften its policy. Repo rates fell to their lowest level during the 2008 crisis but rose during the pandemic, indicating a significant demand for these instruments to ensure stability. Since the 2008 crisis and pandemic, the easing policy has led to an increase in Fed assets. This has significant implications for the ability of monetary policy to respond to today's challenges and has led to the need for very careful control of assets. But in 2022, the Fed had to take measures to curb inflationary trends, in particular raising the discount rate. The regression analysis carried out in the article demonstrates a significant impact of monetary instruments on the consumer price index, which indicates the effectiveness of those methods used by the Fed. The article analyzes the use of traditional and nontraditional monetary policy tools of the Fed in different economic conditions and the possible risks and negative consequences of the use of non-traditional tools, such as quantitative easing and very low interest rates. Although these techniques can support the economy in a crisis, their risks need to be taken into account. The findings contribute to the knowledge of monetary policy as a management tool and provide stakeholders with valuable insights for future strategizing. [ABSTRACT FROM AUTHOR]

This study assesses the effects of the European Central Bank's (ECB) unconventional monetary policy (UMP) on the prices of selected European stock market indices during the European sovereign debt (2010–2012) and the COVID-19 pandemic (2020–2022) crises interventions. This research employs the instrumental variables (IV) two-stage least squares (2SLS) model approach to evaluate the effects of changes in the size of the ECB's balance sheet on the pricing of key equity market indices in Europe. The results of this study suggest that the ECB's asset value expansion had the opposite statistically significant effects on the European stock market indices' prices between the interventions. That is, an increase in the ECB's balance sheet size was associated with a decrease in the prices of the indices during the sovereign debt crisis and with a rise during the COVID-19 pandemic. This research pinpoints the price sensitivity of each of the European equity indices to the ECB's UMP and determines the different outcomes of the ECB's quantitative easing policy between the interventions. [ABSTRACT FROM AUTHOR]

The US Federal Reserve has been using quantitative easing as an unconventional monetary policy tool for providing liquidity and credit-market facilities to banks, and undertaking large-scale asset purchases in periods of crisis. This study carefully examines whether the US stock market has been responsive to the use of quantitative easing over time. A major contribution of this study to the extant literature is the introduction of the novel rolling windows nonparametric causality-in-quantiles approach to studying the reaction of the stock market to quantitative easing. This approach provides a means of investigating the time-varying causality between the variables across quantiles. The standard nonparametric causality-in-quantiles test results show that stock market performance is significantly predicted by quantitative easing, except at very low and very high levels of stock returns (volatility). The rolling windows nonparametric causality-in-quantiles test results indicate that the causal effect of quantitative easing on stock market volatility and returns becomes pronounced during periods of crisis. The reactions are most significant in periods corresponding to the Asian financial crisis, the global financial crisis and the COVID-19 pandemic outbreak. Overall, the causal effect of quantitative easing on both stock market returns and volatility changes through time; the effect on stock market returns is also greater than on stock market volatility. [ABSTRACT FROM AUTHOR]

Summary: This paper evaluates the impact of quantitative easing on income and wealth of individual euro area households. We first estimate the aggregate effects of a quantitative easing (QE) shock, identified by means of external instruments, in a multi‐country vector autoregression (VAR) model with unemployment, wages, gross operating surplus, interest rates, house prices, and stock prices. We then distribute the aggregate effects across households using a reduced‐form simulation on micro‐data, which captures the portfolio composition, the income composition, and the earnings heterogeneity channels of transmission. The earnings heterogeneity channel is important: QE compresses the income distribution because many households with lower incomes become employed. In contrast, monetary policy has only negligible effects on the Gini coefficient for wealth: While high‐wealth households benefit from higher stock prices, middle‐wealth households benefit from higher house prices. [ABSTRACT FROM AUTHOR]

Competing macroeconomic hypotheses have been developed to explain the US housing market and possible bubble behavior. We employ both seasonally adjusted (SA) and non-seasonally adjusted (NSA) monthly data for about 30 independent variables to examine alternative macro hypotheses for home prices. Using a neural network model as an atheoretical non-linear approach to capture the relative importance of alternative macro variables, we show that these hypotheses generate different macro relevance. As an alternative to testing housing time series, we focus on bubble identification being hypothesis dependent. Model forecast errors (residuals) identify the potential presence of bubbles through standardized residual CUSUM tests for structural breaks. By testing for housing bubbles from these unstructured models, we generate conclusions on the presence of bubbles prior to the Great Financial Crisis and the post-pandemic periods. Competing macro hypotheses or narratives will generate different conclusions on the presence of bubbles and create bubble identification issues. [ABSTRACT FROM AUTHOR]

Black Swan Events (BSEs) are those unplanned events that significantly and negatively impact various aspects of human life. The COVID-19 pandemic and the Global Financial Crisis (GFC) in 2008 have been considered by many as BSE in recent times. During these events, governments usually implement policies to assuage the impact on various sectors of the economy and the populace. This paper identified some strategies and policies adopted by the Australian government during the COVID-19 pandemic, especially the QE monetary policy and their impact on the housing market from the perspective of stakeholders in the industry. A qualitative research method was used to solicit information from respondents. A thematic analysis was employed to unravel the government's fiscal policies and the QE monetary policy as responsible for mitigating the effects of BSE. These policies sought to, among other reasons, keep interest rates low and keep money in the economy to revive the ailing economy. The findings revealed that the BSEs affected the Australian economy in multiple ways. We also found that the conventional and unconventional policy strategies deployed in response to the BSEs in Australia were impacting the Australian housing market in varying significance manner. [ABSTRACT FROM AUTHOR]

This study delves into the nuanced relationship between quantitative easing (QE) programs implemented by the European Central Bank (ECB) and asset prices in the Eurozone, focusing particularly on the short-term effects. Through the utilization of a linear regression model, supplemented by the introduction of a binary variable designed to isolate the immediate impact of ECB announcements, the analysis aims to disentangle the multifaceted influences of monetary policy communication and broader QE measures on stock price dynamics. The findings of this investigation reveal notable insights into the effects of ECB QE initiatives on asset prices. While certain components of the ECB's QE programs, such as the asset-backed securities purchase program and the third covered bond purchase program, exhibit statistically significant effects on asset prices, others, including the corporate sector purchase program and the public sector purchase program, do not. Additionally, the statistical analysis does not provide sufficient evidence to conclusively support the hypothesis that ECB QE programs lead to increased asset prices in the Eurozone, particularly in the short term. Despite the empirical evidence presented, it is crucial to acknowledge the methodological limitations inherent in the study. Endogeneity, anticipation of market behavior, and qualitative market dynamics pose notable challenges to the interpretation of results. Nevertheless, this study contributes to a deeper understanding of the mechanisms through which monetary policy influences financial markets in the Eurozone. The implications of these findings extend beyond academic discourse, carrying significance for policymakers, investors, and market participants. By offering insights into the effectiveness of QE measures as tools for promoting economic stability and growth, this study informs decision-making processes and shapes expectations regarding the impact of ECB policies on asset prices in the Eurozone. In conclusion, while the analysis presented in this study represents a step forward in unraveling the complexities of the relationship between ECB QE programs and asset prices, further research is warranted to address the methodological limitations and refine our understanding of this crucial aspect of monetary policy transmission mechanisms. [ABSTRACT FROM AUTHOR]

This article aims to investigate the anti-crisis reforms of the monetary policy of the Federal Reserve System (FRS) of the United States during the global financial crisis, the pandemic period, and the worsening of the military conflict in Ukraine. The study showed a significant decline in inflation due to the reduced demand for goods and services in the first two crises. Under these conditions, the Fed needed unprecedented measures to soften its policy. Repo rates fell to their lowest level during the 2008 crisis but rose during the pandemic, indicating a significant demand for these instruments to ensure stability. Since the 2008 crisis and pandemic, the easing policy has led to an increase in Fed assets. This has significant implications for the ability of monetary policy to respond to today's challenges and has led to the need for very careful control of assets. But in 2022, the Fed had to take measures to curb inflationary trends, in particular raising the discount rate. The regression analysis carried out in the article demonstrates a significant impact of monetary instruments on the consumer price index, which indicates the effectiveness of those methods used by the Fed. The article analyzes the use of traditional and non-traditional monetary policy tools of the Fed in different economic conditions and the possible risks and negative consequences of the use of non-traditional tools, such as quantitative easing and very low interest rates. Although these techniques can support the economy in a crisis, their risks need to be taken into account. The findings contribute to the knowledge of monetary policy as a management tool and provide stakeholders with valuable insights for future strategizing.

We investigate the behavior of shorts, considered sophisticated investors, before and after a set of Federal Reserve unconventional monetary policy announcements that spot bond markets did not fully anticipate. Short interest in agency securities systematically predicts bond price changes and other asset returns on the days of monetary announcements, particularly when growth or monetary news is released, indicating shorts correctly anticipate these surprises. Shorts also systematically rebalance after announcements in the direction of the announcement surprise when the announcement releases monetary or growth news, suggesting that shorts interpret these announcements to imply further yield changes in the same direction. [ABSTRACT FROM AUTHOR]

This paper (re-)evaluates the effectiveness of central bank asset purchases in the euro area given their prominent role in the ECB's response to the pandemic as well as the evidence from the US suggesting diminishing returns of this policy measure over time. We analyse their macroeconomic impact in the euro area using a time-varying parameter structural vector autoregression with stochastic volatility and perform identification via sign and zero restrictions of Arias et al. (Econometrica 86:658–720, 2018), their fusion with high-frequency information approach akin to Jarociński and Karadi (Am Econ Macroecon 12:1–43, 2020) and a novel method which merges high-frequency identification with narrative sign restrictions of Antonlin-Diaz and Rubio-Ramirez (Am Econ Rev 108:2802–2829, 2018). We find that the potency of the ECB's asset purchases to lift inflation has indeed considerably declined over time with several factors contributing to a more muted response of prices to central bank asset purchases. Our results show that the reanchoring channel is no longer active while the counterproductive effects via the mechanism outlined in Boehl et al. (Working Paper No. 691, 2020), which we dub the capacity utilization channel, have emerged lately and are further complemented with disinflationary effects stemming from the cost channel. Also, the effects passed through more standard transmission channels of central bank asset purchases like portfolio rebalancing and signalling, while still significant, appear to be less persistent recently. Overall, our findings point to a diminishing return of the ECB's asset purchases to stabilize inflation and its expectations in the euro area. [ABSTRACT FROM AUTHOR]

Monetary financing – the issuance of public money to support public expenditure – remains a widespread policy taboo. In this article, we analyze the operational practices of the Bank of England, the Federal Reserve and the European Central Bank (ECB) from the 20th onwards to argue that monetary finance should be understood as a conventional and legitimate part of central banks' core functions. We argue that monetary financing serves a crucial macro-financial role in the face of large fluctuations in the demand for and supply of government debt, where the central bank acts to stabilize sovereign debt markets. We show that monetary financing has been a stable and pervasive feature of the Bank of England's and the Federal Reserve's operations. Turning to the ECB, we show that by the mid-2000s the view came to dominate the institution that the central bank should allow markets to punish governments for excessive deficits. This view informed the ECB's catastrophic reluctance to act on the 2008 and 2009 Financial Crisis deficits. By 2020 that attitude had once again largely been abandoned. [ABSTRACT FROM AUTHOR]