Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/218911 
Year of Publication: 
2020
Series/Report no.: 
BoF Economics Review No. 5/2020
Publisher: 
Bank of Finland, Helsinki
Abstract: 
We study the yield curve control in Eurozone. We apply Chen, Cúrdia and Ferrero (2012) model that uses a financial friction to break Wallace's neutrality. We calibrate a bond supply shock that corresponds to the observed change in the time premium in euro area when the APP program was introduced. With some model simulations, we show that the effectiveness of both unconventional monetary policy and fiscal policy are enhanced, when the yield curve control is applied. Thus, we find that the yield curve control can be an effective tool, if applied in a credible manner for a long enough time period during an effective lower bound episode.
Subjects: 
Yield curve control
monetary policy
fiscal policy
efficient lower bound
liquidity trap
JEL: 
E52
E58
Persistent Identifier of the first edition: 
Document Type: 
Research Report

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