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The central-bank balance sheet as an instrument of monetarypolicy

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  • Cúrdia, Vasco
  • Woodford, Michael

Abstract

We extend a standard New Keynesian model to allow an analysis of "unconventional" dimensions of policy alongside traditional interest-rate policy. We find that quantitative easing in the strict sense is likely to be ineffective, but that targeted asset purchases by a central bank can instead be effective when financial markets are sufficiently disrupted, and we discuss the conditions under which such interventions increase welfare. We also discuss optimal policy with regard to the payment of interest on reserves.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 58 (2011)
Issue (Month): 1 (January)
Pages: 54-79

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Handle: RePEc:eee:moneco:v:58:y:2011:i:1:p:54-79

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Web page: http://www.elsevier.com/locate/inca/505566

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Keywords: Credit policy Quantitative easing Zero lower bound Interest on reserves;

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References

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  1. Adam Ashcraft & Nicolae Gârleanu & Lasse Heje Pedersen, 2011. "Two Monetary Tools: Interest Rates and Haircuts," NBER Chapters, in: NBER Macroeconomics Annual 2010, Volume 25, pages 143-180 National Bureau of Economic Research, Inc.
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  1. Blogs review: Wallace Neutrality and Balance Sheet Monetary Policy
    by ? in Bruegel blog on 2012-09-10 12:37:48
  2. Quantitativate Esta... 2
    by Generico in Economista Serial Crónico on 2010-11-09 19:55:00
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