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An Analysis of the Literature on International Unconventional Monetary Policy

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Abstract

This paper evaluates the literature on international unconventional monetary policies (UMP). Introducing market segmentation, limits-to-arbitrage, and time-consistent policy in standard models permits a theoretical role for UMP. Empirical studies provide compelling evidence that UMP influenced international asset prices and tail-risk in the desired manner. Calibrated modeling and vector autoregressive (VAR) exercises imply that these policies also improved macroeconomic outcomes. We assess the recent debate on the empirical evidence and discuss central bank assessments of UMP. Despite qualified successes, we recommend that UMP be reserved for crises and/or when the zero bound constrains conventional monetary policy.

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  • Saroj Bhattarai & Christopher J. Neely, 2016. "An Analysis of the Literature on International Unconventional Monetary Policy," Working Papers 2016-021, Federal Reserve Bank of St. Louis, revised 04 May 2020.
    • Handle: RePEc:fip:fedlwp:2016-021
    DOI: 10.20955/wp.2016.021
    Note: Previous title [updated October 2018]: A Survey of the Empirical Literature on U.S. Unconventional Monetary Policy; Publisher DOI: https://doi.org/10.1257/jel.20201493
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    More about this item

    Keywords

    unconventional monetary policy; effective lower bound; quantitative easing; event study;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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