Date of Award


Degree Name

Doctor of Philosophy



First Advisor

Dr. Susan Pozo

Second Advisor

Dr. Eskander Alvi

Third Advisor

Dr. Kevin Corder


Quantitative easing, QQE, ETF


The main objective of these three essays is to examine the impact of quantitative easing (QE) policies on macroeconomic indicators. The first essay focuses on the cross-border effect of U.S. QE shocks in Latin America, while the second and third essays focus on the effects of Japan’s QE policies on consumer and stock prices. In the first essay, I examine the global impacts of U.S. QE shocks on output and inflation in Latin American countries through trade linkages. It presents a monthly global model that combines individual country vector error-correction models in which domestic (endogenous) variables are related to the country-specific foreign (weakly exogenous) variables, constructed using trade weights. A global vector autoregression (GVAR) model is estimated for eight countries, including the Euro area treated as a single economy. The estimation period runs from January 2008 to May 2016. The findings from the GVAR model are expressed using impulse response functions (IRFs). The basic findings are that quantitative easing policy in the U.S. impacts output negatively for the Latin American countries as a region and for Brazil and Mexico in particular. However, this is short-lived as output declines upon impact of the shock, but the decline gradually dissipates in fewer than eight months. The impact of quantitative easing shocks on inflation is, for the most part, not detectable in all the Latin American countries.

In the second essay, I examine the impact of Japan’s quantitative and qualitative easing (QQE) policy on curbing deflation. To this end, monthly data from April 2013 to October 2019 is used. Japan utilized various monetary policies to implement QQE and this essay summarizes the various policies into one monetary proxy (latent factor). To do this, I use a factor augmented vector autoregressive (FAVAR) model which analyzes the impacts of the QQE policy measures in a two-stage process. In stage 1, a principal component analysis (PCA) is conducted. The PCA is used to extract the first principal component of monetary policy. In stage 2, a standard 4-variable vector autoregression (VAR) model is estimated. The variables are the consumer price index, the indus-trial production, the monetary policy proxy, and the uncollateralized call rate. An exogenous structural dummy is included in the VAR model to account for a structural break in the call rate. The findings from the VAR model are expressed using IRFs. The main findings indicate that the effect of the monetary policy shock on inflation is insignificant. That is, monetary policy of this form does not stimulate inflation in Japan. The impact of the monetary policy shock is also insignificant in the case of industrial production and the call rate.

In the third essay, I examine the impact of the Bank of Japan’s exchange traded fund (ETF) purchases on the Nikkei stock price. To this end, monthly data from December 2010 to April 2020 is used. The paper estimates a 6-variable VAR model which analyzes the impacts of Bank of Japan’s ETF purchases using variance decompositions (VDCs) and IRFs. The variables are U.S. S&P 500 stock index, real effective exchange rate, consumer price index, industrial production, exchange traded funds, and Nikkei stock index. VDCs indicate that the forecast error variance of the Nikkei stock index is significantly explained by shocks to ETF in 12-month and 24-months horizons. Shocks to S&P 500 and the exchange rate are also significant in explaining the variability in the Nikkei stock index. The main finding from the IRFs indicate that the effect of a shock to ETF (the stock purchasing policy) on the Nikkei stock index is positive and significant, attesting to the portfolio balance channel in which intervention in the stock market leads to increases in aggregate demand for stocks and prices of stocks.

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