Alternative Asset Purchase Programs: A Comparative Study of the Federal Reserve, Bank of Japan, European Central Bank and Bank of England

When conventional monetary policy measures and traditional lender of last resort facilities proved insufficient to stabilize the economy and undo the depth of the 2008 financial crisis, many of the world’s leading central banks implemented unconventional monetary policy operations. The Federal Reserve was viewed as a leader in this effort when it became the first central bank during the financial crisis to enter into Large Scale Asset Purchase (LSAP) Programs, acquiring large quantities of long-term Treasuries and mortgage-backed securities (MBS) while simultaneously expanding its balance sheet to roughly $4.5 trillion.

This study uses the Federal Reserve’s experience with three rounds of LSAP programs as a benchmark for comparative analysis with the Bank of England (BOE), the European Central Bank (ECB) and the Bank of Japan’s (BOJ) asset purchase programs. The report explores the size, composition and rationale behind each of the central banks’ diverse programs, with a particular emphasis on their goals, effectiveness and exit strategies. This was done by reviewing the large body of literature and scholarly research on the relevant programs and supplementing it with the Capstone team’s critical analysis. By shedding light on the successes, shortcomings and inherent technical and institutional challenges of the LSAP programs across the world’s leading central banks, the report provides the Federal Reserve Bank of New York with a deeper understanding of alternative approaches to LSAP programs that they may use in their future conduct of Fed monetary policy operations.