Should Unconventional Monetary Policies Become Conventional? / Dominic Quint, Pau Rabanal.

Format:

Book

Government document

Author/Creator:

Quint, Dominic.

Contributor:

Rabanal, Pau.

Series:

IMF Working Papers; Working Paper ; No. 2017/085

IMF Working Papers

Language:

English

Subjects (All):

Monetary policy.

Physical Description:

1 online resource (44 pages) : illustrations.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2017.

Summary:

The large recession that followed the Global Financial Crisis of 2008-09 triggered unprecedented monetary policy easing around the world. Most central banks in advanced economies deployed new instruments to affect credit conditions and to provide liquidity at a large scale after shortterm policy rates reached their effective lower bound. In this paper, we study if this new set of tools, commonly labeled as unconventional monetary policies (UMP), should still be used when economic conditions and interest rates normalize. In particular, we study the optimality of asset purchase programs by using an estimated non-linear DSGE model with a banking sector and long-term private and public debt for the United States. We find that the benefits of using such UMP in normal times are substantial, equivalent to 1.45 percent of consumption. However, the benefits from using UMP are shock-dependent and mostly arise when the economy is hit by financial shocks. When more traditional business cycle shocks (such as supply and demand shocks) hit the economy, the benefits of using UMP are negligible or zero.

Notes:

Includes bibliographical references.

Description based on online resource; title from PDF title page (ebrary, viewed May 4, 2017).

ISBN:

9781475591392

147559139X

9781475591453

1475591454