Board of Governors of the Federal Reserve System

Figure 1. Cumulative Change in Securities Held Outright by the Federal Reserve

This line graph shows two time series: Change in securities in the 2007 recession (as a black dashed line) and in the 2020 recession (as a red dashed line). The vertical axis is in Trillions of Dollars, and ranges from negative 0.75 to 3.50. The horizontal axis is in Weeks Since the Recession Started, and ranges from 0 to 400. The footnote clarifies that we use the NBER recession dates and include the entire month of the first month of the recession. The black line for 2007 begins at 0, dips slightly to about negative 0.3, then starts rising around 75 weeks after the recession begins. From then on, it rises at a moderate pace, plateauing intermittently as well. The line reaches about 2.5 trillion dollars around 300 weeks after the recession begins, and 3.3 trillion dollars around 350 weeks after the recession begins. The red line for the 2020 recession rises sharply beginning around 2 weeks since the recession start, reaching over 2 trillion dollars by about 3 weeks, and ending at 3 trillion dollars around 45 weeks after the recession start.

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Figure 2. The Changing Correlation between Oil and Equity Returns

This line graph has a longer left panel and shorter right panel. Both panels show a single time series, which is the rolling correlation between daily oil and equity returns. The horizontal axis of the left panel covers the date range January 1995 to December 2020. The right panel provides a closer look at the period June 2019 to December 2020. The vertical axis for both panels is the correlation, ranging from -0.8 to 0.8. The correlation series is plotted such that the date axis marks the end of the three-month rolling window over which the correlation is calculated. Gray recession shading indicates the previous and current ZLB periods. The previous ZLB period covers April 2009 to December 2014 and July 2015 to December 2015, the periods during which the Taylor-rule implied notional rate is negative. The current ZLB period covers March 15, 2020 through December 31, 2020. From 1995 to around the start of 2009, the correlation series oscillates between -0.4 and around 0.2. From 2009 to around 2014, the correlation is mostly positive, ranging from 0.3 to 0.7. After falling in 2014, it rises again around mid-2015 through mid-2016 and then oscillates between 0 and 0.5 until March 2020, at which time it spikes to 0.7, falls back to 0.2 rather quickly, rises back to 0.7, and eventually settles around 0.4. The same series is plotted in the right panel, but with a date range of June 2019 to December 2020. The correlation gradually falls from 0.4 in June 2019 to 0.1 in late February 2020. It then spikes to about 0.7 in early March 2020, falls back relative quickly to around 0.3 in May 2020, and rises back to 0.7 in August 2020. It then remains around 0.4 through December 2020.

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Figure 3: The Changing Response to Macroeconomic News Surprises

Figure 3 has three panels, each of which is a bar graph for one of the three main dependent variables: Interest rates, equities, and oil. Each panel shows 4 gray bars with a black dot in the middle, where each bar represents a sample period, as defined in Table 1. The black dots represent the value of $$\beta$$ from the regression using pooled surprises, $$Y_t = \alpha + \beta S_t + \varepsilon_t$$, where $$S_t$$ is the average of standardized news on day $$t$$. The value of $$\beta$$ measures the response of each dependent variable to a one standard deviation news surprise. The gray bars represent 2 standard deviation confidence intervals. The values of the dots are the values of $$\beta$$ as reported in the above table. The confidence intervals are also listed under the values of $$\beta$$.

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