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Unconventional U.S. Monetary Policy: New Tools, Same Channels?

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  • Martin Feldkircher

    () (Oesterreichische Nationalbank (OeNB), A-1090 Vienna, Austria)

  • Florian Huber

    () (Salzburg Centre of European Union Studies (SCEUS), A-5020 Salzburg, Austria)

Abstract

In this paper, we compare the transmission of a conventional monetary policy shock with that of an unexpected decrease in the term spread, which mirrors quantitative easing. Employing a time-varying vector autoregression with stochastic volatility, our results are two-fold: First, the spread shock works mainly through a boost to consumer wealth growth, while a conventional monetary policy shock affects real output growth via a broad credit/bank lending channel. Second, both shocks exhibit a distinct pattern over our sample period. More specifically, we find small output effects of a conventional monetary policy shock during the period of the global financial crisis and stronger effects in its aftermath. This might imply that when the central bank has left the policy rate unaltered for an extended period of time, a policy surprise might boost output particularly strongly. By contrast, the spread shock has affected output growth most strongly during the period of the global financial crisis and less so thereafter. This might point to diminishing effects of large-scale asset purchase programs.

Suggested Citation

  • Martin Feldkircher & Florian Huber, 2018. "Unconventional U.S. Monetary Policy: New Tools, Same Channels?," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 11(4), pages 1-31, October.
  • Handle: RePEc:gam:jjrfmx:v:11:y:2018:i:4:p:71-:d:178738
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Florian Huber & Gregor Kastner & Martin Feldkircher, 2019. "Should I stay or should I go? A latent threshold approach to large‐scale mixture innovation models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 34(5), pages 621-640, August.
    2. Fritz Breuss, 2017. "The United States-Euro Area Growth Gap Puzzle," WIFO Working Papers 541, WIFO.
    3. repec:gam:jjrfmx:v:12:y:2019:i:2:p:57-:d:220488 is not listed on IDEAS
    4. Burriel, Pablo & Galesi, Alessandro, 2018. "Uncovering the heterogeneous effects of ECB unconventional monetary policies across euro area countries," European Economic Review, Elsevier, vol. 101(C), pages 210-229.

    More about this item

    Keywords

    unconventional monetary policy; transmission channel; Bayesian TVP-SV-VAR;

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • E - Macroeconomics and Monetary Economics
    • F2 - International Economics - - International Factor Movements and International Business
    • F3 - International Economics - - International Finance
    • G - Financial Economics

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