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Unconventional monetary policies: a re-appraisal

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  • Claudio Borio
  • Anna Zabai

Abstract

We explore the effectiveness and balance of benefits and costs of so-called "unconventional" monetary policy measures extensively implemented in the wake of the financial crisis: balance sheet policies (commonly termed "quantitative easing"), forward guidance and negative policy rates. Our objective is to provide the reader with a helpful entry point to the burgeoning empirical literature and with a specific perspective on the complex issues involved. We reach three main conclusions: there is ample evidence that, to varying degrees, these measures have succeeded in influencing financial conditions even though their ultimate impact on output and inflation is harder to pin down; the balance of the benefits and costs is likely to deteriorate over time; and the measures are generally best regarded as exceptional, for use in very specific circumstances. Whether this will turn out to be the case, however, is doubtful at best and depends on more fundamental features of monetary policy frameworks. In the paper, we also provide a critique of prevailing analyses of "helicopter money" and explore in more depth the role of negative nominal interest rates in our fundamentally monetary economies, highlighting some risks.

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  • Claudio Borio & Anna Zabai, 2016. "Unconventional monetary policies: a re-appraisal," BIS Working Papers 570, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:570
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    1. Relying on the Fed's Balance Sheet
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2018-02-26 12:56:17

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    1. Haldane, Andrew & Roberts-Sklar, Matt & Wieladek, Tomasz & Young, Chris, 2016. "QE: the story so far," CEPR Discussion Papers 11691, C.E.P.R. Discussion Papers.
    2. Yimin Xu & Jakob de Haan, 2016. "Does the Fed's unconventional monetary policy weaken the link between the financial and the real sector?," DNB Working Papers 529, Netherlands Central Bank, Research Department.
    3. Belke, Angar & Gros, Daniel & Osowski, Thomas, 2017. "The effectiveness of the Fed’s quantitative easing policy: New evidence based on international interest rate differentials," Journal of International Money and Finance, Elsevier, vol. 73(PB), pages 335-349.
    4. Beck, Guenter W. & Wieland, Volker, 2017. "How to normalize monetary policy in the Euro area," IMFS Working Paper Series 115, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    5. repec:bkr:journl:v:77:y:2018:i:1:p:71-107 is not listed on IDEAS
    6. repec:eee:intfin:v:49:y:2017:i:c:p:88-102 is not listed on IDEAS
    7. repec:gam:jijfss:v:5:y:2017:i:2:p:12-:d:95264 is not listed on IDEAS
    8. van Riet, Ad, 2017. "The ECB's fight against low inflation : On the effects of ultra-low interest rates," Other publications TiSEM ec7f8a3b-a32e-42e4-8d01-7, Tilburg University, School of Economics and Management.
    9. Gambetti, Luca & Musso, Alberto, 2017. "The macroeconomic impact of the ECB's expanded asset purchase programme (APP)," Working Paper Series 2075, European Central Bank.
    10. Anne-Marie Rieu-Foucault, 2018. "Les interventions de crise de la FED et de la BCE diffèrent-elles ?," EconomiX Working Papers 2018-31, University of Paris Nanterre, EconomiX.
    11. repec:eee:finana:v:52:y:2017:i:c:p:281-291 is not listed on IDEAS
    12. Jörg Bibow, 2018. "Unconventional monetary policies and central bank profits," IMK Studies 62-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    13. repec:lrk:eeaart:36_1_20 is not listed on IDEAS
    14. Christophe Blot & Jérôme Creel & Paul Hubert & Fabien Labondance, 2017. "Eurozone bond market dynamics, ECB monetary policy and financial stress," Sciences Po publications 18, Sciences Po.
    15. repec:eee:jmacro:v:54:y:2017:i:pa:p:110-126 is not listed on IDEAS

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    unconventional monetary policies; balance sheet policies; forward guidance; negative interest rates;

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