Evaluating Unconventional Monetary Policies Why Aren’t They More Effective?

Abstract

We use a general equilibrium …nance model that features explicit government purchases of private debts to shed light on some of the principal working mechanisms of the Federal Reserve's large-scale asset purchases (LSAP) and their macroeconomic e¤ects.Our model predicts that unless private asset purchases are highly persistent and extremely large (on the order of more than 50% of annual GDP), money injections through LSAP cannot e¤ectively boost aggregate output and employment even if in ‡ation is fully anchored and the real interest rate signi…cantly reduced.Our framework also sheds light on some longstanding …nancial puzzles and monetary policy questions facing central banks around the world, such as (i) the ‡ight to liquidity under a credit crunch and debt crisis, (ii) the liquidity trap, and (iii) the low in ‡ation puzzle under quantitative easing.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 12 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.