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Should Unconventional Monetary Policies Become Conventional?

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  • Quint, Dominic
  • Rabanal, Pau

Abstract

After the recent crisis, central banks deployed unconventional monetary policies (UMP) to affect credit conditions and to provide liquidity at a large scale. We study if UMP should still be used when economic conditions normalize. Using an estimated non-linear DSGE model with a banking sector and long-term debt for the US, we show that the benefits of using UMP in normal times are substantial. However, the benefits are shock-dependent and mostly arise when the economy is hit by financial shocks.

Suggested Citation

  • Quint, Dominic & Rabanal, Pau, 2017. "Should Unconventional Monetary Policies Become Conventional?," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168218, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc17:168218
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    Cited by:

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    2. Christian Pfister & Jean-Guillaume Sahuc, 2020. "Unconventional monetary policies: A stock-taking exercise," Revue d'économie politique, Dalloz, vol. 130(2), pages 137-169.
    3. Robert Kurtzman & David Zeke, 2020. "Misallocation Costs of Digging Deeper into the Central Bank Toolkit," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 38, pages 94-126, October.
    4. Atashbar, Tohid, 2019. "A Blueprint For Creating A "Non-Conventional Unconventional" Monetary System And Arrangement," Studies in Applied Economics 141, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
    5. Brand, Claus & Bielecki, Marcin & Penalver, Adrian, 2018. "The natural rate of interest: estimates, drivers, and challenges to monetary policy JEL Classification: E52, E43," Occasional Paper Series 217, European Central Bank.

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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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