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The non-linear effects of the Fed's asset purchases

The work analyses, with reference to the United States, the effects of quantitative easing, i.e. the large-scale asset purchase made by the central bank, on economic activity, inflation, asset prices and interest rates. Quantitative easing is measured by the value of the securities purchased in relation to GDP. The work shows that the effects are different depending on the level of market volatility. Quantitative easing induces an increase in economic activity and inflation, together with an increase in the prices of risky assets and a reduction in long-term interest rates. However, these results occur only in the presence of high volatility in the financial markets, which risks jeopardizing their proper functioning; the effectiveness of the monetary authorities' intervention stems from their ability to restore it.