the effects of the ecb s expanded asset purchase programme abstract this paper provides empirical evidence on the financial and macroeconomic impact of the news associated to the announcement launching the ecb s expanded asset purchase programme app we proxy the app announcement shock with an announcement variable derived from the institutional features of the app and survey based evidence the variable is used in a time varying coefficient var model with stochastic volatility to estimate the effects of the announcement shock the evidence suggests that this shock had a significant upward effect on both real economic activity and hicp inflation in the euro area the response of long term interest rates gave rise to a flattening of the yield curve in the short term followed by a steepening in the medium term several channels of transmission appear to have been activated including the portfolio rebalancing channel the exchange rate channel and the credit channel

what is the effect of unconventional monetary policy on bank performance this paper examines the relationship between unconventional monetary policy and the us banking performance unconventional monetary policy is captured through the central bank s assets and excess reserves results show that unconventional monetary policy has a negative relationship with bank performance further analysis shows that the negative association between unconventional monetary policy and performance is mitigated for banks with a high level of asset diversification and low deposit funding we also find that the negative relationship between unconventional monetary policy and performance subdues for deposit insured financial institutions finally we use dynamic panel threshold analysis which reveals that the negative association between unconventional monetary policy and bank performance is particularly pronounced above the reported threshold value

optimal fiscal and monetary policy with occasionally binding zero bound constraints abstract this paper studies optimal fiscal and monetary policy when the nominal interest rate is subject to the zero lower bound zlb constraint in a stochastic new keynesian economy in the baseline model calibrated to match key features of the u s economy it is optimal for the government to increase its spending when at the zlb in the stochastic environment by about 60 percent more than it would in the deterministic environment the presence of uncertainty creates a unique time consistency problem if the steady state is inefficient although access to government spending policy increases welfare in the face of a large deflationary shock it decreases welfare during normal times as the government reduces the nominal interest rate less aggressively before reaching the zlb

liquidity monetary policy and unemployment a new monetarist approach we discover a consumption channel of monetary policy in a model with money and government bonds when the central bank withdraws government bonds short term or long term through open market operations it lowers returns on bonds the lower return has a direct negative impact on consumption by households that hold bonds and an indirect negative impact on consumption by households that hold money as a result firms earn less profits from production which leads to higher unemployment the existence of such a consumption channel can help us understand the effects of unconventional monetary policy

international spillovers of large scale asset purchases this paper evaluates the international spillover eects of large scale asset purchases lsaps using a two country dynamic stochastic general equilibrium model with nominal and real rigidities and portfolio balance eects portfolio balance eects arise from imperfect substitution between short and long term bond portfolios in each country as well as between domestic and foreign bonds within these portfolios we show that lsaps lower both domestic and foreign long term yields and stimulate economic activity in both countries international spillover eects

lack of confidence the zero lower bound and the virtue of fiscal rules abstract in the presence of the zero lower bound standard business cycle models with a taylor type monetary policy rule are prone to equilibrium multiplicity a drop in private sector confidence can drive the economy into a liquidity trap without any change in fundamentals i show in the context of a standard new keynesian model that it is possible to design ricardian fiscal spending rules that insulate the economy from such expectations driven liquidity traps in the case of price adjustment costs desirable fiscal rules ensure that a drop in confidence does not lead to a decline in real marginal costs in the case of nominal wage adjustment costs desirable fiscal spending rules ensure that a drop in confidence does not lead to a decline in the ratio of the marginal rate of substitution between private consumption and hours worked relative to the real wage rate

determinacy and identification with taylor rules the new keynesian taylor rule theory of inflation determination relies on explosive dynamics by raising interest rates in response to inflation the fed induces ever larger inflation unless inflation jumps to one particular value on each date however economics does not rule out explosive inflation so inflation remains indeterminate attempts to fix this problem assume that the government will choose to blow up the economy if alternative equilibria emerge by following policies we usually consider impossible the taylor rule is not identified without unrealistic assumptions thus taylor rule regressions do not show that the fed moved from passive to active policy in 1980

duopoly in exhaustible resource exploration and extraction strategic considerations of exploration and extraction are investigated in a two player two period two stage perfect equilibrium framework relative to two plant monopoly the duopolists explore more and extract more period by period a mixed game in which there is co operation upstream in exploration and cournot competition down stream in quantitites extracted is investigated we also note that increasing returns to scale in exploration can introduce an unstable solution with a corner solution the presumed stable equilibrium

the ecb s asset purchase programme a model based evaluation abstract this paper uses a dynamic stochastic general equilibrium model with financial frictions to quantify the effects of the european central bank s recent asset purchase programme our results suggest that the macroeconomic effects of purchases are potentially important when the programme is associated with forward guidance on the interest rate the signalling that the future monetary policy stance will remain accommodative is the prominent transmission channel

when does a central bank s balance sheet require fiscal support abstract using a simple general equilibrium model we argue that it would be appropriate for a central bank with a large balance sheet composed of long duration nominal assets to have access to and be willing to ask for support for its balance sheet by the fiscal authority otherwise its ability to control inflation may be at risk this need for balance sheet support a within government transaction is distinct from the need for fiscal backing of inflation policy that arises even in models where the central bank s balance sheet is merged with that of the rest of the government

quantitative easing in the 1930s during the 1934 39 recovery from the u s great depression overnight interest rates were usually at a lower bound meanwhile american monetary authorities followed policies related to today s debates on quantitative easing they tried to stabilize yields on treasury bonds with open market operations they created rapid growth in high powered money and they allowed transitory factors to affect high powered money effects of these policies on bond yields reveal a portfolio effect of short duration asset supply on term premiums this portfolio effect helps explain why high powered money growth was associated with recovery of real activity over 1934 39

the macroeconomic effects of large scale asset purchase programmes the effects of asset purchase programs on macroeconomic variables are likely to be moderate we reach this conclusion after simulating the impact of the federal reserve s second large scale asset purchase program lsap ii in a dsge model enriched with a preferred habitat framework and estimated on u s data our simulations suggest that such a program increases gdp growth by less than half a percentage point although the effect on the level of gdp is very persistent the program s marginal contribution to infl ation is very small one key reason for our fi ndings is that we estimate a small degree of fi nancial market segmentation if we enrich the set of observables with a measure of long term debt the semi elasticity of the risk premium to the amount of debt in privatesector hands is substantially smaller than that reported in the recent empirical literature in this case our baseline estimates of the effects of lsap ii on the macroeconomy decrease by at least a factor of two throughout the analysis a commitment to an extended period at the zero lower bound for nominal interest rates increases the effects of asset purchase programs on gdp growth and infl ation

occbin a toolkit for solving dynamic models with occasionally binding constraints easily abstract the toolkit adapts a first order perturbation approach and applies it in a piecewise fashion to solve dynamic models with occasionally binding constraints our examples include a real business cycle model with a constraint on the level of investment and a new keynesian model subject to the zero lower bound on nominal interest rates compared with a high quality numerical solution the piecewise linear perturbation method can adequately capture key properties of the models we consider a key advantage of the piecewise linear perturbation method is its applicability to models with a large number of state variables

learning about and exploiting exhaustible resource deposits of uncertain size the kemp loury model of a single uncertain deposit is cast in an n state framework and optimal programs characterized robson s problem of arranging the optimal sequence of uncertain deposits is recast and a market failure involving the jointness of learning about deposit size and gaining revenue from extracted ore is isolated the value of learning by preliminary extraction is characterized and extensions to the problem of arranging optimal sequences are noted this abstract was borrowed from another version of this item

unconventional government debt purchases as a supplement to conventional monetary policy abstract in response to the great financial crisis the federal reserve the bank of england and many other central banks 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

automatic stabilizers and economic crisis us vs europe this paper analyzes the effectiveness of the tax and transfer systems in the eu and the us to provide income insurance through automatic stabilization in the recent economic crisis we find that automatic stabilizers absorb 38 of a proportional income shock in the eu compared to 32 in the us in the case of an unemployment shock 47 of the shock is absorbed in the eu compared to 34 in the us this cushioning of disposable income leads to a demand stabilization of up to 30 in the eu and up to 20 in the us there is large heterogeneity within the eu automatic stabilizers in eastern and southern europe are much lower than in central and northern european countries we also investigate whether countries with weak automatic stabilizers have enacted larger fiscal stimulus programs

preference for output price uncertainty by the non renewable resource extracting firm abstract we establish a general preference for price uncertainty by the price taking risk neutral non renewable resource extracting firm with orthodox convex extraction costs we prove that the relevant value function for profits over an interval is convex in output price

tobin s imperfect asset substitution in optimizing general equilibrium in this paper we present a dynamic optimizing model that allows explicitly for imperfect substitutability between different financial assets this is specified in a manner which captures tobin s 1969 view that an expansion of one asset s supply affects both the yield on that asset and the spread or risk premium between returns on that asset and alternative assets our estimates of this model on u s data confirm that some of the observed deviations of long term rates from the expectations theory of the term structure can be traced to movements in the relative stocks of financial assets the richer aggregate demand and asset specifications imply that there exists an additional channel of monetary policy our results suggest that central bank operations exercise a modest influence on the relative prices of alternative financial securities and so exert an extra effect on long term yields and aggregate demand separate from their effect on the expected path of short term rates

the euro area bond free float and the implications for qe this paper examines how shocks to government bond duration risk held by price sensitive investors affect the euro area term structure of interest rates and the wider macroeconomy we construct a new measure of the bond free float which adjusts total debt for foreign official holdings and weights by residual maturity using a small macrofinance bayesian vector autoregression var model we estimate that the first round of asset purchases under the european central bank s ecb public sector purchase program reduced euro area 10 year bond yields by around 30 bps in 2015 the positive impact on the output gap and inflation in 2016 was about 0 2 and 0 3 ppt respectively

evaluating the macroeconomic effects of the ecb s unconventional monetary policies we quantify the macroeconomic effects of the european central bank s unconventional monetary policies using a dynamic stochastic general equilibrium model which includes a set of shadow interest rates extracted from the yield curve these shadow rates provide unconstrained measures of the overall stance of monetary policy counterfactual analyses show that without unconventional measures the euro area would have suffered i a substantial loss of output since the great recession and ii a period of deflation from mid 2015 to early 2017 specifically year on year inflation and gdp growth would have been on average about 0 61 and 1 09 below their actual levels over the period 2014q1 17q2 respectively

liquidity traps and expectation dynamics fiscal stimulus or fiscal austerity we examine global dynamics under infinite horizon learning in new keynesian models where the interest rate rule is subject to the zero lower bound as in evans guse and honkapohja 2008 the intended steady state is locally but not globally stable unstable deflationary paths emerge after large pessimistic shocks to expectations for large expectation shocks that push interest rates to the zero bound a temporary fiscal stimulus or a policy of fiscal austerity appropriately tailored in magnitude and duration will insulate the economy from deflation traps however fiscal switching rules that automatically kick in without discretionary fine tuning can be equally effective

optimal monetary and fiscal policy with a zero bound on nominal interest rates i characterize optimal monetary and fiscal policy in a stochastic new keynesian model when nominal interest rates may occasionally hit the zero lower bound the benevolent policymaker controls the short term nominal interest rate and the level of government spending under discretionary policy accounting for fiscal stabilization policy eliminates to a large extent the welfare losses associated with the presence of the zero bound under commitment the gains associated with the use of the fiscal policy tool remain modest even though fiscal stabilization policy is part of the optimal policy mix

using changes in auction maturity sectors to help identify the impact of qe on gilt yields this article uses a novel way of identifying part of the impact of quantitative easing qe on gilt yields using natural experiments associated with bank of england announcements about changes in the maturity distribution of future gilt purchases we find that changes in expected qe purchases had a significant effect on gilt yields following each announcement in march 2009 august 2009 and february 2012 the local supply effects we identify appear to be important they may account for around half of the total impact on gilt yields in these events and are passed through to yields of related assets

effects of explicit fomc policy rate guidance on interest rate expectations we quantify the impact of explicit fomc policy rate guidance announcements at the zero lower bound on eurodollar interest rate futures we find that they significantly reduced implied interest rates and led to a flattening of the yield curve

liquidity traps learning and stagnation we examine global economic dynamics under learning in a new keynesian model in which the interest rate rule is subject to the zero lower bound under normal monetary and fiscal policy the intended steady state is locally but not globally stable large pessimistic shocks to expectations can lead to deflationary spirals with falling prices and falling output to avoid this outcome we recommend augmenting normal policies with aggressive monetary and fiscal policy that guarantee a lower bound on inflation in contrast policies geared toward ensuring an output lower bound are insufficient for avoiding deflationary spirals

flow effects of central bank asset purchases on sovereign bond prices evidence from a natural experiment we estimate the response of sovereign bond prices to net supply shocks caused by purchase operations under the ecb s public sector purchase programme pspp to avoid simultaneity bias in the estimated relationship between prices and purchases we exploit a pspp feature that renders securities temporarily ineligible for reasons unrelated to their prices using these purchase restrictions as an instrument to identify exogenous variation in purchase volumes we find that pspp causes statistically significant and economically relevant upward price impacts the impacts are short lived and concentrated in securities issued by higher yield jurisdictions and characterized by higher maturity and lower liquidity

measuring the effects of federal reserve forward guidance and asset purchases on financial markets i extend the methods of gurkaynak sack and swanson 2005 to separately identify the effects of federal reserve forward guidance and large scale asset purchases lsaps during the 2009 15 u s zero lower bound zlb period i find that both forward guidance and lsaps had substantial and highly statistically significant effects on medium term treasury yields stock prices and exchange rates comparable in magnitude to the effects of the federal funds rate before the zlb forward guidance was more effective than lsaps at moving short term treasury yields while lsaps were more effective than forward guidance and the federal funds rate at moving longer term treasury yields corporate bond yields and interest rate uncertainty however the effects of forward guidance were not very persistent with a half life of 1 4 months the effects of lsaps seem to be more persistent i conclude that overall in terms of these criteria lsaps were a more effective policy tool than forward guidance during the zlb period

fiscal policy in an expectations driven liquidity trap we study the effects of fiscal policy interventions in a liquidity trap in a model with nominal rigidities and an interest rate rule in a liquidity trap caused by a self fulfilling state of low confidence higher government spending has deflationary effects that reduce the spending multiplier when the zero lower bound is binding instead cuts in marginal labor tax rates are inflationary and become more expansionary when the zero lower bound is binding these findings contradict popular views about the effects of fiscal policy in a liquidity trap

dealing with a liquidity trap when government debt matters optimal time consistent monetary and fiscal policy how does the need to preserve government debt sustainability affect the optimal monetary and fiscal policy response to a liquidity trap to provide an answer we employ a small stochastic new keynesian model with a zero bound on nominal interest rates and characterize optimal time consistent stabilization policies we focus on two policy tools the short term nominal interest rate and debt financed government spending the optimal policy response to a liquidity trap critically depends on the prevailing debt burden while the optimal amount of government spending is decreasing in the level of outstanding government debt future monetary policy is becoming more accommodative triggering a change in private sector expectations that helps to dampen the fall in output and inflation at the outset of the liquidity trap

financial spillover and global risk in a multi region model of the world economy abstract this paper estimates a three region dsge model ea us row with international financial linkages in the form of cross border equity holding and allowing for region specific as well as global financial shocks which match empirical measures of financial tightness and global stock market valuation spillover from financial shocks increases with international financial integration and is practically zero under full home bias in normal times the global risk captures international synchronisation of financial cycles spillover of financial shocks is amplified at the zero lower bound at which investment risk takes on the characteristics of a general uncertainty shock the model results suggest that integrated financial markets should provide a powerful motivation for international policy coordination to prevent financial turmoil

unconventional fiscal policy at the zero bound when the zero lower bound on nominal interest rates binds monetary policy cannot provide appropriate stimulus we show that in the standard new keynesian model tax policy can deliver such stimulus at no cost and in a time consistent manner there is no need to use inecient policies such as

international spillovers of quantitative easing abstract this paper develops a two country model with asset market segmentation to investigate the effects of quantitative easing implemented by the major central banks on a typical small open economy that follows independent monetary policy the model is able to replicate the key empirical facts on emerging countries response to large scale asset purchases conducted abroad including inflow of capital to local sovereign bond markets an increase in international comovement of term premia and change in the responsiveness of the exchange rate to interest rate differentials according to our simulations quantitative easing abroad boosts domestic demand in the small economy but undermines its international competitiveness and depresses aggregate output at least in the short run this is in contrast to conventional monetary easing in the large economy which has positive spillovers to output in other countries we also find that limiting quantitative easing spillovers might require policies that affect directly international capital flows like purchasing assets by the small economy s central bank

the perils of taylor rules abstract since john taylor s 1993 carnegie rochester conf ser publ policy39 195 214 seminal paper a large literature has argued that active interest rate feedback rules that is rules that respond to increases in inflation with a more than one for one increase in the nominal interest rate are stabilizing in this paper we argue that once the zero bound on nominal interest rates is taken into account active interest rate feedback rules can easily lead to unexpected consequences specifically we show that even if the steady state at which monetary policy is active is locally the unique equilibrium typically there exist an infinite number of equilibrium trajectories originating arbitrarily close to that steady state that converge to a liquidity trap that is a steady state in which the nominal interest rate is near zero and inflation is possibly negative journal of economic literature classification numbers e52 e31 e63

the ties that bind monetary policy and government debt management the financial crisis and subsequent economic recession led to a rapid increase in the issuance of public debt but large scale purchases of bonds by the federal reserve and other major central banks have significantly reduced the scale and maturity of public debt that would otherwise have been held by the private sector we present new evidence that tilting the maturity structure of private sector holdings significantly influences term premia even outside crisis times our framework helps explain both the bond yield conundrum and the effectiveness of quantitative easing we suggest that these findings raise two important policy questions one is should a central bank contrary to recent orthodoxy use its balance sheet as an additional complementary instrument of monetary policy to influence as part of the monetary transmission mechanism the long term interest rate the second is how should central banks and governments ensure that debt management properly takes account of the implications for both monetary and financial stability

the macroeconomic effects of quantitative easing in the euro area evidence from an estimated dsge model this paper analyses the macroeconomic effects of the ecb s quantitative easing programme using an open economy dsge model estimated with bayesian techniques using data on government debt stocks and yields across maturities we identify the parameter governing portfolio adjustment in the private sector shock decompositions suggest a positive contribution of ecb qe to ea year on year output growth and inflation of up to 0 4 and 0 5 pp in the standard linearised version of the model allowing for an occasionally binding zero bound constraint by using piecewise linear solution techniques raises the positive impact up to 1 0 and 0 7 pp respectively

asset substitutability and monetary policy an alternative characterization abstract a distance function is defined for a simple portfolio choice problem and then used to express the impact on asset prices of a change in an asset stock as the sum of a substitution and a wealth effect substitutes and complements are defined with reference to qualtity rather than price changes this method of characterizing asset substitutability leads to simpler and more easily interpreted results when analyzing monetary policy that does the standard approach which expresses asset price changes in terms of the price elasticities of the asset demand functions

monetary policy bond returns and debt dynamics abstract using the government s intertemporal budget constraint we quantify the contribution of returns paid on the u s government s debt portfolio to the evolution of the debt to gdp ratio we show that announcements of unconventional monetary policy measures by the federal reserve between 2008 iv and 2012 as a part of macroeconomic stabilization were associated with a sizable increase in returns and debt to gdp ratios and contributed to fiscal imbalances we use the federal reserve s portfolio composition as a proxy for unconventional monetary policy measures and show that it is significantly related to future bond returns and fiscal balances

eliminating a deflationary trap through superinertial interest rate rules abstract this paper demonstrates that even in the presence of a zero lower bound on nominal interest rates central banks can eliminate a deflationary trap by the conduct of interest rate rules that have superinertia

self fulfilling deflations abstract what types of monetary and fiscal policy rules produce self fulfilling deflationary paths that are monotonic and empirically relevant this paper presents simple theoretical conditions that guarantee the existence of these paths in a general equilibrium model with sticky prices these sufficient conditions are weak enough to be satisfied by most monetary and fiscal policy rules a quantification of the model which combines a real shock a la hayashi and prescott 2002 with a simultaneous sunspot that deanchors inflation expectations matches the main empirical features of the japanese deflationary process during the lost decade the results also highlight the key role of the assumption about the anchoring of inflation expectations for the size of fiscal multipliers and in general for any policy analysis

appropriation of common access natural resources through exploration the relevance of the open loop concept in this paper the open loop equilibrium is rehabilitated as a sensible concept for analyzing common property situations in a model of natur al resource exploration in which the sole motivation to explore prior to extraction arises from a strategic incentive to preempt competito rs a consistency rule to the exploration game is applied under which the commonality of reserves is preserved even if strategies are open loop under this rule the so often claimed efficiency of the common property open loop equilibrium is lost copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the effectiveness of alternative monetary policy tools in a zero lower bound environment this paper reviews alternative options for monetary policy when the shortterm interest rate is at the zero lower bound and develops new empirical estimates of the effects of the maturity structure of publicly held debt on the term structure of interest rates we use a model of risk averse arbitrageurs to develop measures of how the maturity structure of debt held by the public might affect the pricing of level slope and curvature term structure risk we find that these treasury factors historically were quite helpful for predicting both yields and excess returns over 1990 2007 the historical correlations are consistent with the claim that if in december 2006 the fed were to have sold off all its treasury holdings of less than 1 year maturity about 400 billion and use the proceeds to retire treasury debt from the long end this might have resulted in a 14 basis point drop in the 10 year rate and an 11 basis point increase in the 6 month rate we also develop a description of how the dynamic behavior of the term structure of interest rates changed after hitting the zero lower bound in 2009 our estimates imply that at the zero lower bound such a maturity swap would have the same effects as buying 400 billion in long term maturities outright with newly created reserves and could reduce the 10 year rate by 13 basis points without raising short term yields

the federal reserve s large scale asset purchase programmes rationale and effects we provide empirical estimates of the effect of large scale asset purchases lsaps on longer term us treasury yields within a framework that allows for several transmission channels including the scarcity channel associated with the preferred habitat literature and the duration channel associated with interest rate risk we also clarify lsaps role in the broader context of historical monetary policy strategy results indicate that lsap style operations mainly impact longer term rates via the nominal term premium within that premium the response is predominantly embodied in the real term premium the scarcity and duration channels both seem to be of considerable importance

what is wrong with taylor rules using judgment in monetary policy through targeting rules it is argued that inflation targeting is best understood as a commitment to a targeting rule rather than an instrument rule e ither ageneral targeting rule explicit objectives for monetary policy or a specific targeting rule a criterion for the forecasts of the target variables to be fulfilled essentially the equality of the marginal rates of transformation and substitution between the target variables targeting rules allow the use of judgment and extramodel information are more robust and easier to verify than optimal instrument rules and they can nevertheless bring the economy close to the socially optimal equilibrium

the deflation bias and committing to being irresponsible i model deflation at zero nominal interest rate in a microfounded general equilibrium model i show that one can analyze deflation as a credibility problem if three conditions are satisfied first the government s only policy instrument is increasing the money supply by open market operations in short term bonds second the economy is subject to large negative demand shocks third the government cannot commit to future policy i call the credibility problem that arises under these conditions the deflation bias i propose several policies to solve it they all involve printing money or issuing nominal debt in addition they require cutting taxes buying real assets such as stocks or purchasing foreign exchange the government credibly commits to being irresponsible by pursuing these policies it commits to higher money supply in the future so that the private sector expects inflation instead of deflation this is optimal since it curbs deflation and increases output by lowering the real rate of return

government financing decisions and asset returns abstract this paper presents an empirical investigation of the relation between government financing decisions and asset returns in particular the focus is on whether a substitution of debt financing for tax financing of a given level of expenditures is associated with an increase in interest rates the paper brings a different perspective to empirical investigations of government fiscal policies by examining the response of asset prices in an efficient capital market to such policies rather than focusing on aggregate consumption behavior the results are consistent with the idea that asset prices are unrelated to how the government finances its expenditures the results however also indicate that the capital market is not indifferent with respect to the level of government expenditures as higher interest rates are associated with increases in government purchases

announcements of ecb unconventional programs implications for the sovereign spreads of stressed euro area countries abstract this paper studies the effects of ecb communications about unconventional monetary policy operations on the sovereign spreads of greece ireland italy portugal and spain relative to germany between 2008 and 2012 more than fifty events concerning non standard operations are identified and classified with respect to the specific ecb program the empirical results suggest that the ecb announcements about unconventional monetary policies substantially reduced long term government bond yield spreads relative to german counterparts in all countries except greece particularly among the different types of measures news about the securities markets programme strongly affected the perceived sovereign risk of the five stressed euro area countries while the announcements of the outright monetary transactions seem to have a significant impact only in italy and spain

quantitative easing and unconventional monetary policy an introduction this article assesses the impact of quantitative easing and other unconventional monetary policies followed by central banks in the wake of the financial crisis that began in 2007 we consider the implications of theoretical models for the effectiveness of asset purchases and look at the evidence from a range of empirical studies we also provide an overview of the contributions of the other articles in this feature

have we underestimated the likelihood and severity of zero lower bound events prior to the financial crisis most economists probably did not view the zero lower bound zlb as a major problem for central banks using a range of structural and statistical models we find that previous research understated the zlb threat by ignoring uncertainty about model parameters and latent variables focusing too much on the great moderation experience and relying on structural models whose dynamics cannot generate sustained zlb episodes our analysis also suggests that the federal reserve s asset purchases while materially improving macroeconomic conditions did not prevent the zlb constraint from having first order adverse effects on real activity and inflation