The impact of policy initiatives on credit spreads during the 2007-09 financial crisis

Alan M. Rai

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)

Abstract

This paper assesses the impact of the various "unconventional" U.S. Federal Reserve policies and fiscal policies, introduced during the 2007-09 financial crisis period, on credit market spreads. I also examine the impact of the "conventional" monetary policy stance, defined as the difference between the effective federal funds rate and the rate implied by a Taylor rule. Examining policies initiated between July 2007 and January 2009, I find that fiscal policy announcements did not, in general, reduce market spreads. I also find that while the multitude of "unconventional" monetary policy initiatives were effective in reducing market spreads, the effects were relatively modest. Finally, increases in the Taylor-rule residual are associated with an increase in credit market spreads.
Original languageEnglish
Pages (from-to)45-104
Number of pages60
JournalInternational Journal of Central Banking
Volume9
Issue number1
Publication statusPublished - 2013

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