Effectiveness of Unconventional Monetary Policies in a Low Interest Rate Environment

37 Pages Posted: 25 Jan 2018

See all articles by Andrew J. Filardo

Andrew J. Filardo

Bank for International Settlements (BIS) - Monetary and Economic Department

Jouchi Nakajima

Bank for International Settlements (BIS) - Monetary and Economic Department

Date Written: January 2018

Abstract

Have unconventional monetary policies (UMPs) become less effective at stimulating economies in persistently low interest rate environments? This paper examines that question with a time-varying parameter VAR for the United States, the United Kingdom, the euro area and Japan. One advantage of our approach is the ability to measure an economy's evolving interest rate sensitivity during the post-GFC macroeconomy. Another advantage is the ability to capture time variation in the "natural", or steady state, rate of interest, which allows us to separate interest rate movements that are associated with changes in the stance of monetary policy from those that are not.

Keywords: lending rate, quantitative easing, time-varying parameter VAR model, unconventional monetary policy

JEL Classification: E43, E44, E52, E58

Suggested Citation

Filardo, Andrew J. and Nakajima, Jouchi, Effectiveness of Unconventional Monetary Policies in a Low Interest Rate Environment (January 2018). BIS Working Paper No. 691. Available at SSRN: https://ssrn.com/abstract=3107440

Andrew J. Filardo (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Jouchi Nakajima

Bank for International Settlements (BIS) - Monetary and Economic Department

Centralbahnplatz 2
CH-4002 Basel
Switzerland

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