The Macroeconomic Effects of Large-Scale Asset Purchase Programs


Han Chen

Andrea Ferrero

2012-22 | October 1, 2012

We simulate the Federal Reserve second Large-Scale Asset Purchase program in a DSGE model with bond market segmentation estimated on U.S. data. GDP growth increases by less than a third of a percentage point and inflation barely changes relative to the absence of intervention. The key reasons behind our findings are small estimates for both the elasticity of the risk premium to the quantity of long-term debt and the degree of financial market segmentation. Absent the commitment to keep the nominal interest rate at its lower bound for an extended period, the effects of asset purchase programs would be even smaller.

Article Citation

Ferrero, Andrea, Han Chen, and Vasco Curdia. 2012. “The Macroeconomic Effects of Large-Scale Asset Purchase Programs,” Federal Reserve Bank of San Francisco Working Paper 2012-22. Available at

About the Author
Vasco Cúrdia
Vasco Cúrdia is a research advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Vasco Cúrdia