Conventional and Unconventional Monetary Policy
65 Pages Posted: 13 Nov 2009
There are 2 versions of this paper
Conventional and Unconventional Monetary Policy
Conventional and Unconventional Monetary Policy
Date Written: November 1, 2009
Abstract
We extend a standard New Keynesian model both to incorporate heterogeneity in spending opportunities along with two sources of (potentially time-varying) credit spreads and to allow a role for the central bank’s balance sheet in determining equilibrium. We use the model to investigate the implications of imperfect financial intermediation for familiar monetary policy prescriptions and to consider additional dimensions of central bank policy-variations in the size and composition of the central bank’s balance sheet as well as payment of interest on reserves-alongside the traditional question of the proper operating target for an overnight policy rate. We also study the special problems that arise when the zero lower bound for the policy rate is reached. We show that it is possible to provide criteria for the choice of policy along each of these possible dimensions within a single unified framework, and to achieve policy prescriptions that apply equally well regardless of whether financial markets work efficiently or not and regardless of whether the zero bound on nominal interest rates is reached or not.
Keywords: unconventional monetary policy, credit policy, zero lower bound, central bank balance sheet
JEL Classification: E40, E50
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Credit Frictions and Optimal Monetary Policy
By Vasco Cúrdia and Michael Woodford
-
Credit Frictions and Optimal Monetary Policy
By Vasco Cúrdia and Michael Woodford
-
Credit Frictions and Optimal Monetary Policy
By Vasco Cúrdia and Michael Woodford
-
Credit Spreads and Monetary Policy
By Vasco Cúrdia and Michael Woodford
-
Credit Spreads and Monetary Policy
By Vasco Cúrdia and Michael Woodford
-
Banking and Interest Rates in Monetary Policy Analysis: A Quantitative Exploration
-
Credit and Banking in a DSGE Model of the Euro Area
By Andrea Gerali, Stefano Neri, ...
-
Credit Effects in the Monetary Mechanism
By Cara S. Lown and Donald P. Morgan
-
Conventional and Unconventional Monetary Policy
By Vasco Cúrdia and Michael Woodford
-
The Central-Bank Balance Sheet as an Instrument of Monetary Policy
By Vasco Cúrdia and Michael Woodford