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Macroeconomic effects of an open-ended asset purchase programme

Author

Listed:
  • Burlon, Lorenzo
  • Notarpietro, Alessandro
  • Pisani, Massimiliano

Abstract

We evaluate the effectiveness of an open-ended asset purchase programme (APP) using a New Keynesian model of euro area. We assume that the central bank does not announce the ending date of the programme, and agents form their expectations about possible additional purchases beyond the horizon of the announcement according to the central bank reaction function, that links the purchases to the expected inflation gap. It is showed that the open-ended APP is more effective in stimulating macroeconomic conditions than committing ex ante to an ending date.

Suggested Citation

  • Burlon, Lorenzo & Notarpietro, Alessandro & Pisani, Massimiliano, 2019. "Macroeconomic effects of an open-ended asset purchase programme," Journal of Policy Modeling, Elsevier, vol. 41(6), pages 1144-1159.
  • Handle: RePEc:eee:jpolmo:v:41:y:2019:i:6:p:1144-1159
    DOI: 10.1016/j.jpolmod.2019.03.005
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    More about this item

    Keywords

    Central bank communication; Open-ended announcement; Non-standard monetary policy; DSGE models; Euro area;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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