The Effects of Quantitative Easing Announcements on the Mortgage Market: An Event Study Approach

Round 1

Reviewer 1 Report

The paper thoroughly examined the effects of QE asset purchases on mortgage rate. Just a few minor questions:

Did the author verify that no other significant news events were announced on the same dates as the announcement dates? The author mentioned in footnote 20 the better-than-expected GDP growth announcement of one specific date. Are there others?

Did the author look into utilizing higher frequency data?

Did the author investigate shorter-term mortgage rates? Such as 15- or 20-year mortgage rates?

Author Response

Please see the attached file.

Author Response File: Author Response.docx

Reviewer 2 Report

1. Summary of the paper and main contributions

By means of an event-study analysis, the paper investigates the impact of the announcements of the QE measures implemented in the US on mortgage markets. The author finds that announcements of MBS purchases by the Fed reduced mortgage rates more than Treasury rates. Moreover, he finds that the announcement of a new wave of QE had a larger impact on mortgage rates, while events taking place after had a smaller impact.

2. Overall appraisal

The question the paper attempts to address is interesting and policy-relevant. The presentational style of the paper is good, and the empirical part is well executed. However, some parts should be improved. In what follows, I provide comments aimed at improving the quality of the paper.

3. Some tables and charts should be moved to the Annex (e.g. Table 1, Table 2, Table 9, Table 10).

4.The author introduces equation (1), but he says that “a constant mean return regression is preferred to a market model regression…” (footnote 13). Why does the author use it?

5. In sub-section 5.2 the author estimates the “long-run effects” of the announcements. As “long-run” effects of QE are usually associated with the macroeconomic impact of QE in the medium term, I would recommend using the expression “delayed effects”.

6.The concluding remarks would benefit from a discussion of the policy implications of the main findings.

7.The literature review would benefit from adding the following references on the euro area experience:

·        On the use of event-studies to assess the impact of QE announcements in the euro area:

Altavilla, C., Carboni, G. and Motto, R. (2015), Asset purchase programmes and financial markets: lessons from the euro area, Working Paper Series No 1864, European Central Bank

Altavilla, C., Giannone, D. and Lenza, M. (2016), The financial and macroeconomic effects of the OMT announcements, International Journal of Central Banking, vol. 12(3), pages 29-57

Eser, F. and Schwaab, B. (2016), Evaluating the impact of unconventional monetary policy measures: Empirical evidence from the ECB׳s Securities Markets Programme, Journal of Financial Economics, vol. 119(1), pages 147-167

Falagiarda, Matteo and Reitz, Stefan (2015), Announcements of ECB unconventional programs: Implications for the sovereign spreads of stressed euro area countries, Journal of International Money and Finance, vol. 53(C), pages 276-295

Szczerbowicz, U. (2015), The ECB Unconventional Monetary Policies: Have They Lowered Market Borrowing Costs for Banks and Governments?, International Journal of Central Banking, vol. 11(4), pages 91-127

·        On the impact of ECB's QE policies on mortgage lending:

Adalid, R. and Falagiarda, M. (2018), How repayments manipulate our perceptions about loan dynamics after a boom, Working Paper Series No 2211, European Central Bank

Author Response

Please see the attached file.

Author Response File: Author Response.docx