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March 2013 issue
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Li, Wei
Rai
Lustig
Maddalonia, Peydró
Martín-Oliver, Ruano, Salas-Fumás
Unsal
Benigno
He
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Term Structure Modeling with Supply Factors and the Federal Reserve's Large-Scale Asset Purchase Progarms

by Canlin Li and Min Wei
Division of Monetary Affairs, Federal Reserve Board of Governors

Abstract

This paper estimates an arbitrage-free term structure model with both observable yield factors and Treasury and agency MBS supply factors, and uses it to evaluate the term premium effects of the Federal Reserve’s large-scale asset purchase programs. Our estimates show that the first and second large-scale asset purchase programs and the maturity extension program jointly reduced the ten-year Treasury yield by about 100 basis points.

JEL Codes: G1, E4, C5.

 
Full article (PDF, 38 pages 477 kb)

Discussion by Mark Loewenstein