Abstract: As one of the major means of unconventional monetary policy, large-scale asset purchases are intended to lower the long-term interest rates, maintain the stability of the financial markets and stimulate economic activities. Based on the VAR model with the monthly data from January 2003 to February 2012, this empirical test shows that large-scale asset purchases can significantly lower long-term interest rates, but compared to purchase of common treasury bonds, its role is not significant; large-scale asset purchases may raise the inflation expectation, ease the deflation pressure, and stabilize the price level. Meanwhile it can exert certain positive impact on output, but it is rather weak and its role to stimulate the economic recovery is also limited. The contribution of long-term interest rates to the changes of inflation gap and output gap has increased significantly after the large-scale asset purchases, which indicates that the monetary policy can run more smoothly from the financial markets to the real economy.

Key words: large-scale asset purchases; the effectiveness of monetary policy; unconventional monetary policy