I have been meaning to make a visual aid to some numbers John Williams referenced in his September 23, 2001 speech. It subsequently was written up in the FRBSF Economic Letter (Table 1).
The figure below is his calculation of what various papers in the QE literature would estimate the QE2 effects to be (a large-scale asset purchase of $600 billion). The strength (or perhaps weakness) of these studies is that they are done using different methods and different data. That they are mostly all positive is encouraging. This is the rationale for policy maker’s belief that QE has been effective.
From the economic letter:
… summarizes a number of these studies. In order to facilitate comparison, the estimated effects in each analysis have been renormalized to correspond to the estimated effect on longer-term bond yields of a $600 billion LSAP operation. That, of course, was the size of the Federal Reserve’s asset purchase program completed earlier this year.
…
Almost all of these estimates involve author’s calculations to renormalize the effect to a $600 billion U.S. LSAP.
Now, I have no idea what “longer-term bond yields” is exactly, nor is it clear to me how the normalization is done. The figure below also omitted the Bernanke-Reinhart-Sack (2004) estimate from the Japanese event study – since it has implied effect of 400 basis points with 370 basis points error bands.
The footnote in the table lists the source of the data:
Papers from the figure: Modigliani-Sutch (1966, Sections 3-4), Bernanke-Reinhart-Sack (2004, Table 7, Figure 6, and author’s calculations), Greenwood-Vayanos (2008, Table 2), Krishnamurthy-Vissing-Jorgensen (2011, Section 4), Gagnon et al. (2011, Tables 1-2), D’Amico-King (2010, Figure 3), Hamilton-Wu (2011, Figure 11), Hancock-Passmore (2011, Table 5), Swanson (2011, Table 3), Chung et al. (Figure 10), Joyce et al. (2011, Figure 9), Neely (2011, Table 2).
Reference: “Unconventional Monetary Policy:Lessons from the Past Three Years," FRBSF Economic Letter 2011-31 [Federal Reserve Bank of San Francisco]