The macroeconomic effects of asset purchases revisited

BIS Working Papers No 680
December 2017



In the wake of the Great Financial Crisis (GFC), all major advanced economy central banks sought to stimulate the economy through large-scale asset purchase programmes. There is widespread agreement that this stimulus was critical to halting the crisis and to preventing a deeper and longer-lasting recession. The lacklustre recovery from the GFC has, however, raised questions about whether the measures have been effective over time. Some observers have also voiced concerns that asset purchases may have inflated stock prices.


This paper assesses the impact of asset purchases in the United Kingdom and the United States on the broader economy and on stock prices. Specifically, we compare the effects of the first programmes, from 2008 until mid-2011, with those of programmes launched after mid-2011. We also assess in a novel approach the bearing of market expectations on effectiveness, looking at the Federal Reserve Bank of New York's primary dealer survey.


The results suggest that the initial asset purchase programmes significantly helped the economy, while the subsequent ones had little or no impact. The reduced effectiveness of the later programmes seems to partly reflect the fact that market participants priced in changes in asset purchases before they were announced. This follows from our finding that increases in the expected size of the Federal Reserve's last asset purchase programme had significant positive economic effects. Finally, in all cases we find that asset purchases pushed up stock prices significantly.



This paper revisits the macroeconomic effects of the large-scale asset purchase programmes launched by the Federal Reserve and the Bank of England from 2008. Using a Bayesian VAR, we investigate the macroeconomic impact of shocks to asset purchase announcements and assess changes in their effectiveness based on subsample analysis. The results suggest that the early asset purchase programmes had significant positive macroeconomic effects, while those of the subsequent ones were weaker and in part not significantly different from zero. The reduced effectiveness seems to reflect in part better anticipation of asset purchase programmes over time, since we find significant positive macroeconomic effects when we consider shocks to survey expectations of the Federal Reserve's last asset purchase programme. Finally, in all estimations we find a significant and persistent positive impact of asset purchase shocks on stock prices.

JEL classification: E50, E51, E52

Keywords: unconventional monetary policy, asset purchases, monetary transmission