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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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Citations

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Cited by:
  1. Alexandros Kontonikas & Ronald MacDonald & Aman Saggu, 2012. "Stock market reaction to fed funds rate surprises: state dependence and the financial crisis," Working Papers 2012_11, Business School - Economics, University of Glasgow.
  2. 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 1508, European Central Bank.
  3. Masazumi Hattori & Andreas Schrimpf & Vladyslav Sushko, 2013. "The response of tail risk perceptions to unconventional monetary policy," BIS Working Papers 425, Bank for International Settlements.
  4. 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 381, Netherlands Central Bank, Research Department.
  5. Walentin, Karl, 2013. "Business Cycle Implications of Mortgage Spreads," Working Paper Series 275, Sveriges Riksbank (Central Bank of Sweden).
  6. 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) 203, Bank of Italy, Economic Research and International Relations Area.
  7. Stefan Behrendt, 2013. "Monetary Transmission via the Central Bank Balance Sheet," Global Financial Markets Working Paper Series 49-2013, Friedrich-Schiller-University Jena.

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