Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/126609
Authors: 
Huber, Samuel
Kim, Jaehong
Year of Publication: 
2015
Series/Report no.: 
Working Paper Series, University of Zurich, Department of Economics 193 [rev.]
Abstract: 
We develop a dynamic general equilibrium model to analyze the effects of central bank purchases of government bonds by investigating the following three questions: Under what conditions are these purchases socially desirable, what incentive problems do they mitigate, and how large are these effects? We show that by purchasing government bonds, central banks induce agents to increase their demand for money, which increases the value of money and thereby improves the allocation and welfare. We then analyze the post-crisis period and show that implementing the zero lower bound was optimal and worth 0:014 percent of total consumption.
Subjects: 
monetary theory
over-the-counter markets
open market operations
money demand
pecuniary externality
JEL: 
D52
D62
E31
E40
E50
G11
G12
G28
Document Type: 
Working Paper

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