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Does the sequence matter: interest rates, quantitative easing or forward guidance?

Author

Listed:
  • Tudor Schlanger

    (Yale School of Management)

  • Lena Suchanek

    (Bank of Canada)

  • Jonathan Swarbrick

    (University of St Andrews)

  • Joel Wagner

    (Bank of Canada)

  • Yang Zhang

    (Bank of Canada)

Abstract

We study the role of unconventional monetary policies during a pandemic, focusing on the implementation sequencing of policies when there is a social containment period. Using the Bank of Canada's main projection model (ToTEM), we compare the efficacy of a suite of extended monetary policies (EMPs), finding that the immediate implementation of forward guidance and quantitative easing, followed by credit easing when containment measures are lifted delivers the best outcome. We also quantify the fiscal response needed to offset the gap in gross domestic product created by the effective lower bound, given operational limitations in scaling up EMPs.

Suggested Citation

  • Tudor Schlanger & Lena Suchanek & Jonathan Swarbrick & Joel Wagner & Yang Zhang, 2025. "Does the sequence matter: interest rates, quantitative easing or forward guidance?," Economics Discussion Papers 2501, Department of Economics, The University of St Andrews Business School.
    • Handle: RePEc:san:econdp:2501
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    References listed on IDEAS

    as
    1. Abidi, Nordine & Miquel-Flores, Ixart, 2018. "Who benefits from the corporate QE? A regression discontinuity design approach," Working Paper Series 2145, European Central Bank.
    2. Acurio Vásconez, Verónica & Damette, Olivier & Shanafelt, David W., 2023. "Macroepidemics and unconventional monetary policy," Economic Modelling, Elsevier, vol. 126(C).
    3. Rohan Arora & Sermin Gungor & Joe Nesrallah & Guillaume Ouellet Leblanc & Jonathan Witmer, 2021. "The impact of the Bank of Canada’s Government Bond Purchase Program," Staff Analytical Notes 2021-23, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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