An Analysis of the Literature on International Unconventional Monetary Policy

93 Pages Posted: 4 Nov 2016 Last revised: 21 Feb 2019

See all articles by Saroj Bhattarai

Saroj Bhattarai

University of Texas at Austin - Department of Economics

Christopher J. Neely

Federal Reserve Bank of St. Louis - Research Division

Date Written: November, 2016

Abstract

This paper evaluates the literature on international unconventional monetary policies (UMP). Introducing market segmentation, limits-to-arbitrage, and time-consistent policy in standard models permits a theoretical role for UMP. Empirical studies provide compelling evidence that UMP influenced international asset prices and tail-risk in the desired manner. Calibrated modeling and vector autoregressive (VAR) exercises imply that these policies also improved macroeconomic outcomes. We assess the recent debate on the empirical evidence and discuss central bank assessments of UMP. Despite qualified successes, we recommend that UMP be reserved for crises and/or when the zero bound constrains conventional monetary policy.

JEL Classification: E51, E58, E61, F31, G12

Suggested Citation

Bhattarai, Saroj and Neely, Christopher J., An Analysis of the Literature on International Unconventional Monetary Policy (November, 2016). FRB St. Louis Working Paper No. 2016-21, Available at SSRN: https://ssrn.com/abstract=2863716 or http://dx.doi.org/10.20955/wp.2016.021

Saroj Bhattarai (Contact Author)

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

Christopher J. Neely

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States
314-444-8568 (Phone)
314-444-8731 (Fax)

HOME PAGE: http://www.stls.frb.org/research/econ/cneely/

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