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Perils of unconventional monetary policy
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McMahon, Michael F., Peiris, Udara and Polemarchakis, H. M. (2018) Perils of unconventional monetary policy. Journal of Economic Dynamics and Control, 93 . pp. 92-114. doi:10.1016/j.jedc.2018.01.036 ISSN 0165-1889.
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Official URL: http://doi.org/10.1016/j.jedc.2018.01.036
Abstract
Unconventional monetary policy, by relaxing restrictions on the composition of the balance sheet of the central bank, compromises control over the stochastic path of inflation; or, in open economies, over the stochastic path of exchange rates. If the composition of the balance sheet is unrestricted then the path of inflation is indeterminate. This is the case under pure quantitative easing, where the target is the size of real money balances. In contrast, credit easing policies restrict the composition of the portfolio by targeting a specific expansion in the maturity profile of bonds bought, and thus can implement a determinate path of inflation. The composition of the portfolios traded by monetary-fiscal authorities also determines premia in asset and currency markets.
Item Type: | Journal Article | ||||||||
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Alternative Title: | |||||||||
Subjects: | H Social Sciences > HB Economic Theory | ||||||||
Divisions: | Faculty of Social Sciences > Economics | ||||||||
Library of Congress Subject Headings (LCSH): | Quantitative easing (Monetary policy) | ||||||||
Journal or Publication Title: | Journal of Economic Dynamics and Control | ||||||||
Publisher: | Elsevier BV | ||||||||
ISSN: | 0165-1889 | ||||||||
Official Date: | August 2018 | ||||||||
Dates: |
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Volume: | 93 | ||||||||
Page Range: | pp. 92-114 | ||||||||
DOI: | 10.1016/j.jedc.2018.01.036 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Date of first compliant deposit: | 10 January 2018 | ||||||||
Date of first compliant Open Access: | 20 March 2018 | ||||||||
RIOXX Funder/Project Grant: |
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