Unconventional Monetary Policies in the Euro Area, Japan, and the United Kingdom

By Giovanni Dell'Ariccia, Pau Rabanal, D. Sandri. Journal of Economic Perspectives, 2018

196 citations recorded by the source corpus.

The global financial crisis hit hard in the euro area, the United Kingdom, and Japan. Real GDP from peak to trough contracted by about 6 percent in the euro area and the United Kingdom and by 9 percent in Japan. In all three cases, central banks cut interest rates aggressively and then, as policy rates approached zero, deployed a variety of untested and unconventional monetary policies. In doing so, they hoped to restore the functioning of financial markets, and also to provide further monetary policy accommodation once the policy rate reached the zero lower bound. In all three jurisdictions, the strategy entailed generous liquidity support for banks and other financial intermediaries and large-scale purchases of public (and in some cases private) assets. As a result, central banks’ balance sheets expanded to unprecedented levels. This paper examines the experience with unconventional monetary policies in the euro zone, the United Kingdom, and Japan. The paper starts with a discussion of how quantitative easing, forward guidance, and negative interest rate policies work in theory, and some of their potential side effects. It then reviews the implementation of unconventional monetary policy by the European Central Bank, the Bank of England, and the Bank of Japan, including a narrative of how central banks responded to the crisis and the evidence on the effects of unconventional monetary policy actions.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/1cca74aa84b697005f8cc3e136adf1ac3568baff

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. Jiří Slačálek
2. M. Lenza
3. Marek Jarociński
4. Ricardo M. Sousa
5. Frank Smets

In Finance

1. M. Lenza
2. Jiří Slačálek

Citations in the corpus

• How Does Monetary Policy Affect Income and Wealth Inequality? Evidence from Quantitative Easing in the Euro Area (2018, result): “The impulse responses for GDP and unemployment are qualitatively in line with the previous literature, which also finds relevant and statistically significant effects of asset purchases—see Dell’Ariccia et al. (2018) (e.g., their Table 1) for an up-to-date overview of the literature.”