A monetary analysis of balance sheet policies

• Autores: Markus Hörmann, Andreas Schabert
• Localización: Economic journal, ISSN 0013-0133, Vol. 125, Nº 589, 2015, págs. 1888-1917
• Idioma: inglés
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• Resumen

  • We augment a standard macroeconomic model to analyse the effects and limitations of balance sheet policies. We show that the central bank can stimulate real activity by changing the size or the composition of its balance sheet, when interest rate policy is ineffective. Specifically, the central bank can stabilise the economy by increasing money supply against eligible assets even when the policy rate is at the zero lower bound. By changing the composition of its balance sheet, it can affect interest rates and, for example, neutralise increases in firms' borrowing costs, which is not possible under a single instrument regime. We further analyse the limitations of balance sheet policies and show that they are particularly useful under liquidity demand shocks