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

Abstract

This chapter analyses the empirical literature on the effectiveness of unconventional monetary policies (UMP) in responding to financial crises and boosting economic activity. It considers the circumstances under which these policies have been found to be successful. The chapter also analyses the financial-market and macro-economic effects of UMP in the economies where these policies were introduced as well as their spillover effects across borders. It presents some international evidence that underscores one of the main claims made by central bankers about UMP: that they were essential in preventing much worse economic outcomes after the 2008 financial crisis, that is in advanced economies. The chapter evaluates the evidence of the short-term impact of UMP on financial markets. An alternative to the estimation of vector autoregressive models is estimation using dynamic stochastic general equilibrium models that are widely used by many central banks.

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