The Theory of Unconventional Monetary Policy / Roger Farmer, Pawel Zabczyk.

Format:

Book

Author/Creator:

Farmer, Roger.

Contributor:

National Bureau of Economic Research.

Zabczyk, Pawel.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22135.

NBER working paper series no. w22135

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

This paper is about the effectiveness of qualitative easing, a form of unconventional monetary policy that changes the risk composition of the central bank balance sheet with the goal of stabilizing economic activity. We construct a general equilibrium model where agents have rational expectations and there is a complete set of financial securities, but where some agents are unable to participate in financial markets. We show that a change in the risk composition of the central bank's balance sheet will change equilibrium asset prices and we prove that, in our model, a policy in which the central bank stabilizes non-fundamental fluctuations in the stock market is Pareto improving and self-financing.

Notes:

Print version record

March 2016.