Estimated Impact of the Fed’s Mortgage-Backed Securities Purchase Program

We examine the quantitative impact of the Federal Reserve’s mortgage-backed securities (MBS) purchase program. We focus on how much of the recent decline in mortgage interest rate spreads can be attributed to these purchases. The question is more difficult than frequently perceived because of simultaneous changes in prepayment and default risks. When we control for these risks, we find evidence of statistically insignificant or small effects of the program. For specifications where the existence or announcement of the program appears to have lowered spreads, we find no separate effect of the size of the stock of MBS purchased by the Fed.

Estimated Impact of the Federal Reserve\u27s Mortgage-Backed Securities Purchase Program

Examines the quantitative impact of mortgage-backed securities (MBS) purchase program on mortgage interest rate spreads

$1.25 Trillion is Still Real Money: Some Facts About the Effects of the Federal Reserve’s Mortgage Market Investments

This paper measures the effects on the primary U.S. mortgage market of the large-scale asset purchase (LSAP) program in which the Federal Reserve bought $1.25 trillion of mortgagebacked securities in 2009 and 2010. We use an event-study approach and measure the movements in both prices and quantities around the initial announcement of the LSAP and subsequent changes to the program. We use a new dataset to document the changes in the menu of rates and points offered to borrowers and show that there was wide dispersion in the rate changes generated by the announcement of the LSAP program, with some borrowers seeing immediate rate reductions of up to 40 basis points and other borrowers confronting rate increases. We show that the LSAP program led to a substantial boost in market activity, with discontinuous increases in searches, applications and originations for refinance mortgages, but not purchase mortgages. Finally, we show that more creditworthy borrowers were significantly more likely to benefit from the improved credit availability

The Central-Bank Balance Sheet as an Instrument of Monetary Policy

While many analyses of monetary policy consider only a target for a short-term nominal interest rate, other dimensions of policy have recently been of greater importance: changes in the supply of bank reserves, changes in the assets acquired by central banks, and changes in the interest rate paid on reserves. We extend a standard New Keynesian model to allow a role for the central bank's balance sheet in equilibrium determination, and consider the connections between these alternative dimensions of policy and traditional interest-rate policy. We distinguish between "quantitative easing" in the strict sense and targeted asset purchases by a central bank, and argue that while the former is likely be ineffective at all times, the latter dimension of policy can be effective when financial markets are sufficiently disrupted. Neither is a perfect substitute for conventional interest-rate policy, but purchases of illiquid assets are particularly likely to improve welfare when the zero lower bound on the policy rate is reached. We also consider optimal policy with regard to the payment of interest on reserves; in our model, this requires that the interest rate on reserves be kept near the target for the policy rate at all times

Key Physiological Parameters Dictate Triggering of Activity-Dependent Bulk Endocytosis in Hippocampal Synapses

To maintain neurotransmission in central neurons, several mechanisms are employed to retrieve synaptically exocytosed membrane. The two major modes of synaptic vesicle (SV) retrieval are clathrin-mediated endocytosis and activity-dependent bulk endocytosis (ADBE). ADBE is the dominant SV retrieval mode during intense stimulation, however the precise physiological conditions that trigger this mode are not resolved. To determine these parameters we manipulated rat hippocampal neurons using a wide spectrum of stimuli by varying both the pattern and duration of stimulation. Using live-cell fluorescence imaging and electron microscopy approaches, we established that stimulation frequency, rather than the stimulation load, was critical in the triggering of ADBE. Thus two hundred action potentials, when delivered at high frequency, were sufficient to induce near maximal bulk formation. Furthermore we observed a strong correlation between SV pool size and ability to perform ADBE. We also identified that inhibitory nerve terminals were more likely to utilize ADBE and had a larger SV recycling pool. Thus ADBE in hippocampal synaptic terminals is tightly coupled to stimulation frequency and is more likely to occur in terminals with large SV pools. These results implicate ADBE as a key modulator of both hippocampal neurotransmission and plasticity