  The COVID-19 recession that started in March 2020 led to an unprecedented
decline in economic activity across the globe. To fight this recession, policy
makers in central banks engaged in expansionary monetary policy. This paper
asks whether the measures adopted by the US Federal Reserve (Fed) have been
effective in boosting real activity and calming financial markets. To measure
these effects at high frequencies, we propose a novel mixed frequency vector
autoregressive (MF-VAR) model. This model allows us to combine weekly and
monthly information within an unified framework. Our model combines a set of
macroeconomic aggregates such as industrial production, unemployment rates and
inflation with high frequency information from financial markets such as stock
prices, interest rate spreads and weekly information on the Feds balance sheet
size. The latter set of high frequency time series is used to dynamically
interpolate the monthly time series to obtain weekly macroeconomic measures. We
use this setup to simulate counterfactuals in absence of monetary stimulus. The
results show that the monetary expansion caused higher output growth and stock
market returns, more favorable long-term financing conditions and a
depreciation of the US dollar compared to a no-policy benchmark scenario.
