A Survey of the International Evidence and Lessons Learned About Unconventional Monetary Policies: Is a ‘New Normal’ in Our Future?

Journal of Economic Surveys, Forthcoming

44 Pages Posted: 7 Oct 2018

See all articles by Domenico Lombardi

Domenico Lombardi

Banca di San Marino

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics; Balsillie school of international affairs

Samantha St. Amand

Centre for International Governance Innovation (CIGI)

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Date Written: September 14, 2018

Abstract

This study examines the effectiveness of unconventional monetary policies (UMP). It considers whether these policies have been successful and where their effects remain uncertain. We survey both the domestic financial market and macroeconomic effects of UMP in the economies where these policies were introduced and their international spillover effects. The paper considers the impact of a wide range of UMP rather than the effects of specific policy instruments. We also provide a retrospective on the important case of Japan beginning in the late1990s and ask whether the Eurozone’s experience with UMP is substantively different given its structure of policymaking. Finally, we ask: if the ‘old normal’ is not in our future, should the ‘new normal’ in monetary policy routinely include what we now refer to as UMP? We conclude that UMP can prevent economic collapse but are not designed to promote stronger long-term economic growth. Apart from new communication strategies, the use of UMP under normal circumstances does not appear to be a sound monetary policy strategy. Failure to learn this lesson might also prevent future policy makers from asking or expecting too much from their central banks.

Keywords: Unconventional Monetary Policies; Quantitative Easing; Forward Guidance; Bank of Japan; US Federal Reserve; European Central Bank

Suggested Citation

Lombardi, Domenico and Siklos, Pierre L. and St. Amand, Samantha, A Survey of the International Evidence and Lessons Learned About Unconventional Monetary Policies: Is a ‘New Normal’ in Our Future? (September 14, 2018). Journal of Economic Surveys, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3249292

Domenico Lombardi

Banca di San Marino ( email )

San Marino
Italy

Pierre L. Siklos (Contact Author)

Wilfrid Laurier University - School of Business & Economics ( email )

Department of Economics
75 University Avenue W.
Waterloo, Ontario N2L 3C5
Canada
519-884-0710 Ext.. 3491 (Phone)

HOME PAGE: http://pierrelsiklos.com

Balsillie school of international affairs ( email )

67 Erb Street West
Waterloo, ON N2L 6C2
Canada

Samantha St. Amand

Centre for International Governance Innovation (CIGI) ( email )

57 Erb Street West
Waterloo, Ontario N2L 6C2
Canada

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