Abstract
This paper assesses the impact of the various "unconventional" U.S. Federal Reserve policies and fiscal policies, introduced during the 2007-09 financial crisis period, on credit market spreads. I also examine the impact of the "conventional" monetary policy stance, defined as the difference between the effective federal funds rate and the rate implied by a Taylor rule. Examining policies initiated between July 2007 and January 2009, I find that fiscal policy announcements did not, in general, reduce market spreads. I also find that while the multitude of "unconventional" monetary policy initiatives were effective in reducing market spreads, the effects were relatively modest. Finally, increases in the Taylor-rule residual are associated with an increase in credit market spreads.
Authors
- Alan M. Rai
JEL codes
- E52
- E58
- E63
- G12
- G14