Economic and financial market impacts of the QE announcements

  1. In analyzing the economic and financial market impacts of the QE announcements, what are the probable reasons for the changes in behavior of:
    o long-term interest rates,
    o short-term interest rates,
    o credit default swaps, and
    o inflation expectations.
    Hint: This question is asking for reasons, not a summary of the changes in the Tables. For example, 10 year Treasury yields declined 107 basis points in QE1. Why?
    Class Participation:
  2. Choose one sector of the economy and describe how QE may stimulate that sector. Examples of sectors: households, banks, corporations, etc.
  3. The case reflects statements from several Federal Reserve and other officials regarding potential risks (costs) of QE. Choose one of these risks and describe why you do or do not think it was a potential risk.

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