Evaluating unconventional monetary policies -why aren’t they more effective?
We use a general equilibrium finance model that features explicit government purchases of private debts to shed light on some of the principal working mechanisms of the Federal Reserve’s large-scale asset purchases (LSAP) and their macroeconomic effects. Our model predicts that unless private asset purchases are highly persistent and extremely large (on the order of more than 50% of annual GDP), money injections through LSAP cannot effectively boost aggregate output and employment even if inflation is fully anchored and the real interest rate significantly reduced. Our framework also sheds light on some long- standing financial puzzles and monetary policy questions facing central banks around the world, such as (i) the fight to liquidity under a credit crunch and debt crisis, (ii) the liquidity trap, (iii) the inverted yield curve, and (iv) the low inflation puzzle under quantitative easing.
|Date of creation:||2013|
|Contact details of provider:|| Postal: P.O. Box 442, St. Louis, MO 63166|
Web page: http://www.stlouisfed.org/
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James Bullard & Jacek Suda & Aarti Singh & Costas Azariadis, 2014. "Debt Overhang and Monetary Policy," 2014 Meeting Papers 948, Society for Economic Dynamics.
- John Moore & Nobuhiro Kiyotaki, 2008.
"Liquidity, Business Cycles, and Monetary Policy,"
2008 Meeting Papers
35, Society for Economic Dynamics.
- Nobuhiro Kiyotaki & John Moore, 2012. "Liquidity, Business Cycles, and Monetary Policy," NBER Working Papers 17934, National Bureau of Economic Research, Inc.
- Nobuhiro Kiyotaki & John Moore, 2012. "Liquidity, Business Cycles and Monetary Policy," ESE Discussion Papers 113, Edinburgh School of Economics, University of Edinburgh.
- Francisco J. Buera & Benjamin Moll, 2012. "Aggregate Implications of a Credit Crunch," NBER Working Papers 17775, National Bureau of Economic Research, Inc.
- Farmer, Roger E A, 2012.
"Qualitative Easing: How it Works and Why it Matters,"
CEPR Discussion Papers
9153, C.E.P.R. Discussion Papers.
- Roger E.A. Farmer, 2012. "Qualitative Easing: How it Works and Why it Matters," NBER Working Papers 18421, National Bureau of Economic Research, Inc.
- Pengfei Wang & Yi Wen, 2009.
"Financial development and economic volatility: a unified explanation,"
2009-022, Federal Reserve Bank of St. Louis.
- Yi Wen & Pengfei Wang, 2010. "Financial Development and Economic Volatility:A Unified Explanation," 2010 Meeting Papers 66, Society for Economic Dynamics.
- Wang, Pengfei & Wen, Yi & Xu, Zhiwei, 2013. "Financial development and long-run volatility trends," Working Papers 2013-003, Federal Reserve Bank of St. Louis, revised 21 Sep 2016.
- Han Chen & Vasco Cúrdia & Andrea Ferrero, 2012.
"The macroeconomic effects of large-scale asset purchase programs,"
Working Paper Series
2012-22, Federal Reserve Bank of San Francisco.
- Han Chen & Vasco Cúrdia & Andrea Ferrero, 2012. "The Macroeconomic Effects of Large‐scale Asset Purchase Programmes," Economic Journal, Royal Economic Society, vol. 122(564), pages 289-315, November.
- Vasco Curdia & Andrea Ferrero & Han Chen, 2012. "The Macroeconomic Effects of Large-Scale Asset Purchase Programs," 2012 Meeting Papers 372, Society for Economic Dynamics.
- Han Chen & Vasco Cúrdia & Andrea Ferrero, 2011. "The macroeconomic effects of large-scale asset purchase programs," Staff Reports 527, Federal Reserve Bank of New York.
- Guido Lorenzoni & Veronica Guerrieri, 2010. "Credit Crises and Liquidity Traps," 2010 Meeting Papers 1182, Society for Economic Dynamics.
- William T. Gavin & Benjamin D. Keen & Alexander W. Richter & Nathaniel A. Throckmorton, 2013.
"Global Dynamics at the Zero Lower Bound,"
Auburn Economics Working Paper Series
auwp2013-17, Department of Economics, Auburn University.
- Gavin, William T. & Keen, Benjamin D. & Richter, Alexander W. & Throckmorton, Nathaniel A., 2015. "The zero lower bound, the dual mandate, and unconventional dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 55(C), pages 14-38.
- William T. Gavin & Benjamin D. Keen & Alexander Richter & Nathaniel Throckmorton, 2013. "Global dynamics at the zero lower bound," Working Papers 2013-007, Federal Reserve Bank of St. Louis.
- Nathaniel Throckmorton & Benjamin Keen & Alexander Richter & William Gavin, 2013. "Global Dynamics at the Zero Lower Bound," 2013 Meeting Papers 839, Society for Economic Dynamics.
- Kehoe, Timothy J & Levine, David K, 2001. "Liquidity Constrained Markets versus Debt Constrained Markets," Econometrica, Econometric Society, vol. 69(3), pages 575-598, May.
When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:2013-028. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao)
If references are entirely missing, you can add them using this form.