Working Paper: The Portfolio Balance Channel of Quantitative Easing in a DSGE Model with Financial Frictions
Working Paper - June 2021 - No. 180
Investors who arbitrage between long term government debt and corporate debt expand the Portfolio Balance Channel in that the eﬀects of Quantitative Easing (QE) spill over to the overall cost of corporate borrowing. I ﬁnd that overall the Federal Reserve’s second round of QE boosts output between 0.5 - 1.7%.