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  5. An Analysis of the Literature on International Unconventional Monetary Policy

An Analysis of the Literature on International Unconventional Monetary Policy

  • Saroj Bhattarai
  • Christopher J. Neely
Journal of Economic Literature
vol. 60, no. 2, June 2022
(pp. 527-97)
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Abstract

This paper evaluates the literature on international unconventional monetary policies (UMPs). Introducing market segmentation, limits-to-arbitrage, and time-consistent policy in standard models permits a theoretical role for UMP. Empirical studies provide compelling evidence that UMPs influenced international asset prices and tail risk in the desired manner. Calibrated modeling and vector autoregressive (VAR) exercises imply that these policies also improved macroeconomic outcomes. We assess the recent debate on the empirical evidence and discuss central bank assessments of UMP. Despite qualified successes, we recommend that UMP be reserved for crises and/or when the zero bound constrains conventional monetary policy.

Citation

Bhattarai, Saroj, and Christopher J. Neely. 2022. "An Analysis of the Literature on International Unconventional Monetary Policy." Journal of Economic Literature, 60 (2): 527-97. DOI: 10.1257/jel.20201493

Additional Materials

JEL Classification

  • E31 Price Level; Inflation; Deflation
  • E43 Interest Rates: Determination, Term Structure, and Effects
  • E44 Financial Markets and the Macroeconomy
  • E52 Monetary Policy
  • E58 Central Banks and Their Policies
  • G12 Equities; Fixed Income Securities
  • G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages