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.
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- Vasco Curdia & Andrea Ferrero & Han Chen, 2012.
"The Macroeconomic Effects of Large-Scale Asset Purchase Programs,"
2012 Meeting Papers
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- 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.
- 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.
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"Global dynamics at the zero lower bound,"
2013-007, Federal Reserve Bank of St. Louis.
- 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.
- Nathaniel Throckmorton & Benjamin Keen & Alexander Richter & William Gavin, 2013. "Global Dynamics at the Zero Lower Bound," 2013 Meeting Papers 839, Society for Economic Dynamics.
- Francisco J. Buera & Benjamin Moll, 2012. "Aggregate Implications of a Credit Crunch," NBER Working Papers 17775, National Bureau of Economic Research, Inc.
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"Qualitative Easing: How it Works and Why it Matters,"
NBER Working Papers
18421, National Bureau of Economic Research, Inc.
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- Gavin, William T. & Keen, Benjamin D. & Richter, Alexander W. & Throckmorton, Nathaniel A., 2015.
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Elsevier, vol. 55(C), pages 14-38.
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"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.
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