@article{Casalena:319233,
      recid = {319233},
      author = {Casalena, Francesco},
      title = {Back to normal? Assessing the effects of the Federal  Reserve's Quantitative Tightening},
      publisher = {Graduate Institute of International and Development  Studies, International Economics Department},
      address = {Geneva. 2024},
      number = {BOOK},
      series = {Graduate Institute of International and Development  Studies Working Paper ; no. 14/2024},
      pages = {72 pages : illustrations},
      year = {2024},
      abstract = {We study the effects of the Federal Reserve's two  Quantitative Tightening (QT) programmes implemented over  the last decade. We use a high frequency identification  strategy to distinguish between conventional monetary  policy shocks, Treasury borrowing announcement shocks and  the unwinding of the balance sheet. Further, we analyse  both QT announcements and operations. Our results show that  the Fed was successful in muting the signalling effect of  its Balance Sheet Policy (BSP) announcements, as statements  not containing quantitative information about QT did not  impact significantly asset prices. Conversely,  communications disclosing information over the size and the  pace of QT had an effect on financial markets. We also find  that QT operations have a significant and persistent  deflationary effect on interest rates and asset prices. A  1-trillion USD reduction in securities holdings by the Fed  is associated with an increase in 10-year Treasury yields  by 2 percentage points. While the contractionary effects of  QT have so far been at least partially offset by liquidity  operations that have expanded the supply of reserves, our  results suggest that balance sheet reductions entail in  principle strong negative effects on financial markets.  Although QT does not represent in the policymakers' view  the primary tool to achieve price stability, it is yet far  from running quietly in the background of the monetary  policy stance.},
      url = {http://repository.graduateinstitute.ch/record/319233},
      doi = {https://doi.org/10.71609/iheid-9wpf-4h08},
}