What are the Macroeconomic Effects of Asset Purchases?

61 Pages Posted: 16 Mar 2015

See all articles by Martin R. Weale

Martin R. Weale

National Institute of Economic and Social Research (NIESR)

Tomasz Wieladek

Bank of England

Multiple version iconThere are 2 versions of this paper

Date Written: March 2015


We examine the impact of large scale asset purchase announcements of government bonds on real GDP and the CPI in the United Kingdom and the United States with a Bayesian VAR, estimated on monthly data from 2009M3 to 2014M5. We identify an asset purchase announcement shock with four different identification schemes, always leaving the reactions of real GDP and CPI unrestricted, to test whether these variables react to asset purchases. We then explore the transmission channels of this policy. The results suggest that an asset purchase announcement of 1% of GDP leads to a statistically significant rise of .58% (.25%) and .62% (.32%) rise in real GDP and CPI for the US (UK). In the US, this policy is transmitted through the portfolio balance channel and a reduction in household uncertainty. In the UK, the policy seems to be mainly transmitted through the impact on investors' risk appetite and household uncertainty.

Keywords: Bayesian VAR, unconventional monetary policy

JEL Classification: E50, E51, E52

Suggested Citation

Weale, Martin R. and Wieladek, Tomasz, What are the Macroeconomic Effects of Asset Purchases? (March 2015). CEPR Discussion Paper No. DP10495, Available at SSRN: https://ssrn.com/abstract=2579245

Martin R. Weale (Contact Author)

National Institute of Economic and Social Research (NIESR) ( email )

2 Dean Trench Street
Smith Square
London SW1P 3HE
United Kingdom

HOME PAGE: http://www.niesr.ac.uk/

Tomasz Wieladek

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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