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The Ramsey Cooperative and Non-Cooperative Unconventional Monetary Policy

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  • Shifu Jiang

Abstract

I study the Ramsey problem for three unconventional monetary policies in a twocountry model. An equity injection into financial intermediaries is the most efficient policy. Due to precautionary effects of future risk, a central bank should exit from these policies in accordance with but slower than the speed of deleveraging in the financial sector. The optimal policy is changed considerably if cross-country policy cooperation is not imposed. In this case, the unconventional interventions tend to be too strong in one country but too weak in the other. The cooperation gain is a function of policy cost. At last, I evaluate several simple rules and find that the rule responding to gaps in asset prices mimics the optimal policy very well.

Suggested Citation

  • Shifu Jiang, 2017. "The Ramsey Cooperative and Non-Cooperative Unconventional Monetary Policy," FIW Working Paper series 180, FIW.
  • Handle: RePEc:wsr:wpaper:y:2017:i:180
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    References listed on IDEAS

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    1. Foerster, Andrew T., 2015. "Financial crises, unconventional monetary policy exit strategies, and agents׳ expectations," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 191-207.
    2. Tom D. Holden & Paul Levine & Jonathan Swarbrick, 2017. "Credit Crunches from Occasionally Binding Bank Borrowing Constraints," Staff Working Papers 17-57, Bank of Canada.
    3. Holden, Tom D., 2016. "Computation of solutions to dynamic models with occasionally binding constraints," EconStor Preprints 144569, ZBW - Leibniz Information Centre for Economics.
    4. Ellison, Martin & Tischbirek, Andreas, 2014. "Unconventional government debt purchases as a supplement to conventional monetary policy," Journal of Economic Dynamics and Control, Elsevier, vol. 43(C), pages 199-217.
    5. Gieck, Jana, 2014. "Unconventional monetary policy in an open economy," Discussion Papers 41/2014, Deutsche Bundesbank.
    6. Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 17-34, January.
    7. Gertler, Mark & Kiyotaki, Nobuhiro & Queralto, Albert, 2012. "Financial crises, bank risk exposure and government financial policy," Journal of Monetary Economics, Elsevier, vol. 59(S), pages 17-34.
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    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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