EconStor >
University of Kent >
School of Economics, University of Kent >
School of Economics Discussion Papers, University of Kent >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/50620
  
Title:Non-conventional monetary policies: QE and the DSGE literature PDF Logo
Authors:Caglar, Evren
Chadha, Jagjit S.
Meaning, Jack
Warren, James
Waters, Alex
Issue Date:2011
Series/Report no.:School of Economics discussion papers 11,10
Abstract:At the zero lower bound, the scale and scope of non-conventional monetary policies have become the key decision variables for monetary policy makers. In the UK, quantitative easing has involved the creation of a fund to purchase medium term dated government bonds with borrowed central bank reserves and so has increased the liquidity of the non-bank financial sector and temporarily eased the budget constraint of HMT. Some of these reserves have been used to increase the extent of capital held by banks and there have also been direct injections of capital into the banking system. We assess some of the issues arising from the three policies by using three separate DSGE models, which take seriously the role of financial frictions. We find that it is possible to correct the effects of a lower zero bound in DSGE models, by (i) offsetting the liquidity premium embedded in long term bonds and/or (ii) adopting countercyclical subsidies to bank capital able and/or (iii) the creation of central bank reserves that reduce the costs of loan supply. But the correct quantitative response and ongoing interaction with standard monetary policy remains an open question.
Subjects:zero bound
open-market operations
quantitative easing
JEL:E31
E40
E51
Document Type:Working Paper
Appears in Collections:School of Economics Discussion Papers, University of Kent

Files in This Item:
File Description SizeFormat
657135232.pdf558.7 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/50620

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.