What effect does quantitative easing or quantitative tightening have on long-term interest rates?

We estimate econometrically the effect of quantitative easing (increasing the size of the central bank’s balance sheet) and quantitative tightening (reducing the size of the central bank’s balance sheet) on 5-year, 10-year, 20-year and 30-year swap rates in the United States and the euro zone. In fact, we study the effect of a change in the size of the central bank’s balance sheet, regardless of its origin. This origin has mainly been quantitative easing since 2008 in the United States and since 2015 in the euro zone. We find that: It is the stock of debt (bonds) held by the central bank that has an effect on long-term interest rates, and not the flow of bond purchases; A USD 1,000 billion increase in the size of the Federal Reserve’s balance sheet reduces dollar interest rates as follows: The 5-year by 13 basis points; The 10-year by 20 basis points; The 20-year by 18 basis points; The 30-year by 18 basis points; A EUR 1,000 billion increase in the size of the ECB’s balance sheet reduces euro interest rates as follows: The 5-year by 17 basis points; The 10-year by 26 basis points; The 20-year by 30 basis points; The 30-year by 33 basis points. The reduction in the size of the Federal Reserve’s balance sheet since January 2022 (USD 350 billion) has therefore led to a 7 basis point rise in the US 10-year interest rate. The reduction in the size of the ECB’s balance sheet since November 2022 (EUR 650 billion) has therefore led to a 17 basis point rise in the euro-zone 10-year interest rate.