Publisher:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft, Kiel, Hamburg
Abstract:
After the recent crisis, central banks deployed unconventional monetary policies (UMP) to affect credit conditions and to provide liquidity at a large scale. We study if UMP should still be used when economic conditions normalize. Using an estimated non-linear DSGE model with a banking sector and long-term debt for the US, we show that the benefits of using UMP in normal times are substantial. However, the benefits are shock-dependent and mostly arise when the economy is hit by financial shocks.