Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212243 
Year of Publication: 
2013
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 3/2013
Publisher: 
Bank of Finland, Helsinki
Abstract: 
In response to the Great Financial Crisis, the Federal Reserve and the Bank of England have adopted unconventional monetary policy instruments. We investigate if one of these, purchases of long-term government debt, could be a valuable addition to conventional short- term interest rate policy even if the main policy rate is not constrained by the zero lower bound. To do so we add a stylised financial sector and central bank asset purchases to an otherwise standard New Keynesian DSGE model. Asset quantities matter for interest rates through a preferred habitat channel. If conventional and unconventional monetary policy instruments are coordinated appropriately then the central bank is better able to stabilise both output and inflation.
Subjects: 
Quantitative Easing
Large-Scale Asset Purchases
Preferred Habitat
Optimal Monetary Policy
JEL: 
E40
E43
E52
E58
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-002-4
Document Type: 
Working Paper

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