Fifty Shades of QE Revisited

TY - JOUR

T1 - Fifty Shades of QE Revisited

AU - Weale, Martin

AU - Wieladek, Tomasz

PY - 2024/9

Y1 - 2024/9

N2 - Fabo, Jancokova, Kempf and Pastor (2021) use OLS regression to show that central bankers report quantitatively larger effects of QE on output and inflation than academic researchers. We reject the null hypothesis of a Gaussian distribution of the residuals in many of these specifications, except for the language regressions. We then repeat the analysis with regression estimators that are robust to a non-Gaussian residual distribution where this is feasible. We use the median regression and the MS regression estimator. With these robust regression approaches, the null hypothesis that central bank and academic researchers report the same quantitative effect of QE on output and inflation cannot be rejected, with point estimates which are less than half as large. This statistical challenge suggests that more research is required to understand better whether central bank researchers report different QE multipliers or not.

AB - Fabo, Jancokova, Kempf and Pastor (2021) use OLS regression to show that central bankers report quantitatively larger effects of QE on output and inflation than academic researchers. We reject the null hypothesis of a Gaussian distribution of the residuals in many of these specifications, except for the language regressions. We then repeat the analysis with regression estimators that are robust to a non-Gaussian residual distribution where this is feasible. We use the median regression and the MS regression estimator. With these robust regression approaches, the null hypothesis that central bank and academic researchers report the same quantitative effect of QE on output and inflation cannot be rejected, with point estimates which are less than half as large. This statistical challenge suggests that more research is required to understand better whether central bank researchers report different QE multipliers or not.

U2 - 10.1016/j.jbankfin.2024.107239

DO - 10.1016/j.jbankfin.2024.107239

M3 - Article

SN - 0378-4266

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

M1 - 107239

ER -