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The Effectiveness of Unconventional Monetary Policy at the Zero Lower Bound: A Cross-Country Analysis

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  • Leonardo Gambacorta
  • Boris Hofmann
  • Gert Peersman

Abstract

This paper assesses the macroeconomic effects of unconventional monetary policies by estimating a panel VAR with monthly data from eight advanced economies over a sample spanning the period since the onset of the global finanancial crisis. It finds that an exogenous increase in central bank balance sheets at the zero lower bound leads to a temporary rise in economic activity and consumer prices. The estimated output effects turn out to be qualitatively similar to the ones found in the literature on the effects of conventional monetary policy, while the impact on the price level is weaker and less persistent. Individual country results suggest that there are no major differences in the macroeconomic effects of unconventional monetary policies across countries, despite the heterogeneity of the measures that were taken.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 384.

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Length: 32 pages
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:bis:biswps:384

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Keywords: unconventional monetary policy; zero lower bound; panel VARs;

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Cited by:
  1. Darracq Pariès, Matthieu & De Santis, Roberto A., 2013. "A non-standard monetary policy shock: the ECB’s 3-year LTROs and the shift in credit supply," Working Paper Series, European Central Bank 1508, European Central Bank.
  2. Alexandros Kontonikas & Ronald MacDonald & Aman Saggu, 2012. "Stock market reaction to fed funds rate surprises: state dependence and the financial crisis," Working Papers, Business School - Economics, University of Glasgow 2012_11, Business School - Economics, University of Glasgow.
  3. Marco Jacopo Lombardi & Feng Zhu, 2014. "A shadow policy rate to calibrate US monetary policy at the zero lower bound," BIS Working Papers, Bank for International Settlements 452, Bank for International Settlements.
  4. Stefan Behrendt, 2013. "Monetary Transmission via the Central Bank Balance Sheet," Global Financial Markets Working Paper Series 49-2013, Friedrich-Schiller-University Jena.
  5. Marco Casiraghi & Eugenio Gaiotti & Lisa Rodano & Alessandro Secchi, 2013. "The impact of unconventional monetary policy on the Italian economy during the sovereign debt crisis," Questioni di Economia e Finanza (Occasional Papers), Bank of Italy, Economic Research and International Relations Area 203, Bank of Italy, Economic Research and International Relations Area.
  6. Walentin, Karl, 2013. "Business Cycle Implications of Mortgage Spreads," Working Paper Series, Sveriges Riksbank (Central Bank of Sweden) 275, Sveriges Riksbank (Central Bank of Sweden), revised 01 Mar 2014.
  7. Mark Gertler & Nobuhiro Kiyotaki, 2014. "Banking, Liquidity and Bank Runs in an Infinite Horizon Economy," IMES Discussion Paper Series, Institute for Monetary and Economic Studies, Bank of Japan 14-E-05, Institute for Monetary and Economic Studies, Bank of Japan.
  8. Jef Boeckx & Maarten Dossche & Gert Peersman, 2014. "Effectiveness and Transmission of the ECB's Balance Sheet Policies," CESifo Working Paper Series, CESifo Group Munich 4907, CESifo Group Munich.
  9. Philip Turner, 2014. "The exit from non-conventional monetary policy: what challenges?," BIS Working Papers, Bank for International Settlements 448, Bank for International Settlements.
  10. Masazumi Hattori & Andreas Schrimpf & Vladyslav Sushko, 2013. "The response of tail risk perceptions to unconventional monetary policy," BIS Working Papers, Bank for International Settlements 425, Bank for International Settlements.
  11. Christiaan Pattipeilohy & Jan Willem van den End & Mostafa Tabbae & Jon Frost & Jakob de Haan, 2013. "Unconventional monetary policy of the ECB during the financial crisis: An assessment and new evidence," DNB Working Papers, Netherlands Central Bank, Research Department 381, Netherlands Central Bank, Research Department.

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