Monetary Policy and Economic Performance Since the Financial Crisis

58 Pages Posted: 20 Oct 2020

See all articles by Dario Caldara

Dario Caldara

Board of Governors of the Federal Reserve System

Etienne Gagnon

Board of Governors of the Federal Reserve System

Enrique Martínez-García

Federal Reserve Bank of Dallas - Research Department

Christopher J. Neely

Federal Reserve Bank of St. Louis - Research Division

Multiple version iconThere are 5 versions of this paper

Date Written: August 27, 2020

Abstract

The analysis in this paper was presented to the Federal Open Market Committee as background for its discussion of the Federal Reserve’s review of monetary policy strategy, tools, and communication practices. The Committee discussed issues related to the review at five consecutive meetings from July 2019 to January 2020. References to the FOMC’s current framework for monetary policy refer to the framework articulated in the Statement on Longer-Run Goals and Monetary Policy Strategy first issued in January 2012 and reaffirmed each January, most recently in January 2019.

We review the macroeconomic performance over the period since the Global Financial Crisis and the challenges in the pursuit of the Federal Reserve’s dual mandate. We characterize the use of forward guidance and balance sheet policies after the federal funds rate reached the effective lower bound. We also review the evidence on the efficacy of these tools and consider whether policymakers might have used them more forcefully. Finally, we examine the post-crisis experience of other major central banks with these policy tools.

Keywords: Global Financial Crisis 2007–09, monetary policy, effective lower bound, structural changes, forward guidance, balance sheet policies

JEL Classification: E31, E32, E52, E58

Suggested Citation

Caldara, Dario and Gagnon, Etienne and Martinez-Garcia, Enrique and Neely, Christopher J., Monetary Policy and Economic Performance Since the Financial Crisis (August 27, 2020). Available at SSRN: https://ssrn.com/abstract=3684919 or http://dx.doi.org/10.2139/ssrn.3684919

Dario Caldara

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Etienne Gagnon

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
2024523522 (Phone)

Enrique Martinez-Garcia (Contact Author)

Federal Reserve Bank of Dallas - Research Department ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States
214-922-5262 (Phone)

HOME PAGE: http://sites.google.com/view/emgeconomics

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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