‘Economists in Jackson Hole Say QE Less Potent Than Fed Believes’ – Bloomberg
This is some great Monday morning quarterbacking from the economists in academia. The wonks have now decided, with the Fed balance sheet at $3.65 trillion and nearly at its peak that maybe this wasn’t such a great idea.
“The portfolio balance channel of QE works largely through narrow channels that affect the prices of purchased assets, with spillovers depending on particulars of the assets and economic conditions,” Northwestern University finance professor Arvind Krishnamurthy and University of California-Berkeley professor Annette Vissing-Jorgensen wrote in the paper. “It does not, as the Fed proposes, work through broad channels such as affecting the term premium on all long-term bonds.”
