Graduation Year


Date of Submission


Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts



Reader 1

Richard C. K. Burdekin

Rights Information

2022 Guillermo J. Santos


At the onset of the COVID-19 pandemic, the increased role of the Federal Reserve as a lender of last resort prompts a reassessment of its monetary policy and how it compares with policies that have worked in the past. Most notably, the Fed has made unprecedented uses of its tools to provide liquidity into the economy and financial markets in an effort to hinder the effects of the pandemic lockdowns. These methods were similar to those used in the 2008 Global Financial Crisis, such as lowering the Effective Federal Funds Rate to a zero-interest rate policy (ZIRP) environment and the purchase of government and corporate bonds through quantitative easing (QE) programs. This paper employs existing economic models that study monetary policy deviations using time-series data leading to the COVID-19 pandemic. The deviations test the effects of a low interest rate policy and an expansive monetary base and how they affect investor sentiment across various asset classes. A moral hazard hypothesis in monetary policy posits that artificially low interest rates and excessive monetary base levels push investors to search for yield and excess risk taking across different asset categories. The asset classes analyzed in this paper are gold (GLD), equity markets (SPY & QQQ), and Bitcoin (BTC). Our findings reveal mixed interpretations regarding the prolonged effect of policy rule deviations across monthly price returns of the assets mentioned above. Deviations from the Taylor rule suggest a positive statistically significant relationship with respect to SPY and GLD, while deviations from the McCallum rule suggest positive statistically significant relationships across SPY, QQQ and GLD.

This thesis is restricted to the Claremont Colleges current faculty, students, and staff.