Using a dataset with weekly-level Treasury holdings of the Federal Reserve in 1932, and the corresponding yields, we first conduct an event study analysis.
This indicates that the 1932 program significantly lowered medium- and long-term Treasury yields.
We find that the significant degree of financial market segmentation in this period made the historical open market purchase operation more effective than QE in stimulating output growth.
Additionally, if the Federal Reserve had continued its operations in 1932, and used the announcement strategy of the QE operation, the upturn in economic activity during the Great Depression could have been achieved sooner.
We find that aging drastically reduces the labor market participation of experienced relative to inexperienced workers; increasing their welfare-, disability-, and especially social security claims.
These results show that while long run risks and habit play a non negligible role, something else is driving the bulk of stock market fluctuations.
We propose a model in which rising supply of experience reduces experienced workers' relative wages, and also negatively and systematically impacts their labor market participation.
We then quasi-experimentally investigate the existence of these effects, using variation across US local labor markets (LLMs) over the last 50 years and instrumenting experience supply by the LLMs' age structures a decade earlier.
The residual is dominant, accounting for more than 80% of the variance of the price-dividend ratio across a variety of priors and specifications.
Moreover, the filtered residual tracks most of the recognizable features of the U. stock market, such as the late 1990's boom and bust.