Breaking the Zero Lower Bound Period: The Shift Across Two Unconventional Policies

The impact of unconventional monetary policies on asset prices can be broken into two distinct time periods in the US. While the impact of large-scale asset purchases was substantial on stock prices and the exchange rate before September 2011, their impact almost fully disappears afterward. On the contrary, the effects of forward guidance on asset prices grow substantially after this date. This shift could be explained by the severe illiquidity in financial markets before September 2011 and the Federal Reserve’s explicit communication regarding the initial policy rate hike afterward.