Safeguarding stability : the impact of the Federal Reserve's unconventional monetary policy on market liquidity

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http://urn.fi/URN:NBN:fi:hulib-201703273317
Title: Safeguarding stability : the impact of the Federal Reserve's unconventional monetary policy on market liquidity
Author: Jantunen, Lauri
Other contributor: Helsingin yliopisto, Valtiotieteellinen tiedekunta, Politiikan ja talouden tutkimuksen laitos
University of Helsinki, Faculty of Social Sciences, Department of Political and Economic Studies
Helsingfors universitet, Statsvetenskapliga fakulteten, Institutionen för politik och ekonomi
Publisher: Helsingfors universitet
Date: 2015
Language: eng
URI: http://urn.fi/URN:NBN:fi:hulib-201703273317
http://hdl.handle.net/10138/158718
Thesis level: master's thesis
Discipline: Economics
Taloustiede
Ekonomi
Abstract: This paper studies the conditions that affected market liquidity during the recent financial crisis, and how this setting resulted in a systemic breakdown in the economy. We also review the Federal Reserves actions and provide empirical evidence on the effectiveness of the Federal Reserves unconventional monetary policy in providing market liquidity during the crisis. We use a dataset consisting of an aggregate market liquidity measure and individual program data on the Federal Reserves activity to analyze the market impact of the Federal Reserves balance sheet programs. In baseline regressions we find no statistically significant evidence that the Federal Reserves unconventional policies had an impact on market liquidity. However, in asymmetric tests, we find that positive changes in the QE1 large-scale asset purchase program and the liquidity to key credit markets program had a statistically significant impact on the market liquidity measure.


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