Unconventional Monetary Policy: A Critical Assessment of the Empirical Literature

35 Pages Posted: 16 Dec 2024

See all articles by Karen Spisso

Karen Spisso

University of Vienna - Department of Philosophy

Anna Stelzer

Oesterreichische Nationalbank (OeNB)

Thomas O. Zörner

Oesterreichische Nationalbank

Date Written: November 15, 2024

Abstract

This paper assesses the effects of unconventional monetary policies through a review of 120 studies published between 2008 and 2024, focusing on four key tools: negative interest rate policy, funding for lending, asset purchase programs, and forward guidance. The analysis examines their impact on price stability, economic growth, financial stability, income and wealth inequality, and resource allocation. Our results show that these measures have been effective in stimulating economic activity and maintaining price stability, leading to higher inflation and supporting economic growth, while also contributing to financial stability by lowering bond yields. However, there have been unintended effects as well, such as concerns over financial stability due to impacts on bank profitability and potential increases in income inequality. Additionally, these measures have been linked to possible misallocation of resources, including lending to non-productive firms. Our findings highlight the need for further research into unintended consequences, particularly in terms of resource allocation and inequality, to guide future policy decisions.

Keywords: Quantitative easing, negative interest rates, forward guidance, credit easing, effective lower bound

JEL Classification: E52, E58, E44

Suggested Citation

Spisso, Karen and Stelzer, Anna and Zörner, Thomas O., Unconventional Monetary Policy: A Critical Assessment of the Empirical Literature (November 15, 2024). Available at SSRN: https://ssrn.com/abstract=5021894 or http://dx.doi.org/10.2139/ssrn.5021894

Karen Spisso

University of Vienna - Department of Philosophy

Universitätsring 1
Vienna, 1010
Austria

Anna Stelzer

Oesterreichische Nationalbank (OeNB) ( email )

Thomas O. Zörner (Contact Author)

Oesterreichische Nationalbank ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

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