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This paper examines the monetary policies the Federal Reserve implemented inresponse to the Global Financial Crisis. More specifically, it analyzes theFederal Reserve's quantitative easing (QE) programs, liquidity facilities, andforward guidance operations conducted from 2007 to 2018. The essay's detailedexamination of these policies culminates in an interrupted time-series (ITS)analysis of the long-term causal effects of the QE programs on U.S. inflationand real GDP. The results of this formal design-based natural experimentalapproach show that the QE operations positively affected U.S. real GDP but didnot significantly impact U.S. inflation. Specifically, it is found that, forthe 2011Q2-2018Q4 post-QE period, real GDP per capita in the U.S. increased byan average of 231 dollars per quarter relative to how it would have changed hadthe QE programs not been conducted. Moreover, the results show that, in 2018Q4,ten years after the beginning of the QE programs, real GDP per capita in theU.S. was 14% higher relative to what it would have been during that quarter hadthere not been the QE programs. These findings contradict Williamson's (2017)informal natural experimental evidence and confirm the conclusions of VARs andnew Keynesian DSGE models that the Federal Reserve's QE policies positivelyaffected U.S. real GDP. The results suggest that the current U.S. and worldwidehigh inflation rates are likely not because of the QE programs implemented inresponse to the financial crisis that accompanied the COVID-19 pandemic. Theyare likely due to the unprecedentedly large fiscal stimulus packages used, thepeculiar nature of the financial downturn itself, the negative supply shocksfrom the war in Ukraine, or a combination of these factors. This paper is thefirst study to measure the macroeconomic effects of QE using a design-basednatural experimental approach.

The Federal Reserve's Response to the Global Financial Crisis and Its Long-Term Impact: An Interrupted Time-Series Natural Experimental Analysis