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Title:New instruments of monetary policy PDF Logo
Authors:Chadha, Jagjit S.
Holly, Sean
Issue Date:2011
Series/Report no.:School of Economics discussion papers 11,09
Abstract:We assess recent developments in monetary policy practice following the financial crisis drawing on papers from a specially convened conference in March 2010. In particular, we consider why central banks throughout the world have injected substantial quantities of liquidity into the financial system and seen their balance sheets expand to multiples of GDP. We outline the rationale for balance sheet operations: (i) portfolio balance of the non-bank financial sector; (ii) an offset for the zero bound; (iii) signalling mechanism about medium term inflation expectations and (iv) the alleviation of the government's budget constraint. We briefly outline the recent experience with QE and draw a distinction between liquidity and macroeconomic stabilisation operations.
Subjects:zero bound
open-market operations
quantitative easing
monetary policy
JEL:E31
E40
E51
Document Type:Working Paper
Appears in Collections:School of Economics Discussion Papers, University of Kent

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