Our approach ... allows us to examine the different transmission channels of asset purchase policy. For the UK, asset purchase announcements have an impact on interest rate futures in the UK and measures of financial market uncertainty, suggesting that ‘signalling’ is an important transmission channel. For the US, only long-term yields and the real exchange rate react to asset purchase shocks, which implies a relatively greater role for the portfolio rebalancing channel. But asset purchases in both countries affect measures of financial-market uncertainty, such as the VIX. This suggests that asset-purchase announcements may also provide economic stimulus through a reduction in uncertainty, which is a channel that has not received much attention in previous work.A point Scott Sumner has been hammering home for over five years now.
Wednesday, June 11, 2014
Announcing makes it so
So say Martin Weale and Tomasz Wieladek, when it's the Bank of England and The Fed announcing asset purchases;