On the quantitative effects of unconventional monetary policies in small open economies

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This paper quantitatively evaluates the effects of several unconventional monetary policies for small open economies. In particular, a New Keynesian model is extended to include a liquidity premium, deviations from uncovered interest rate parity, and a premium in the term structure of interest rates...

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Autor principal: García-Cicco, Javier
Formato: Artículo
Lenguaje:Inglés
Inglés
Publicado: Banco Central de Chile 2019
Materias:
POLITICA MONETARIA
ECONOMIA ABIERTA
MODELOS
LIQUIDEZ
Acceso en línea:https://repositorio.uca.edu.ar/handle/123456789/2297
Aporte de:
Repositorio Institucional de la Universidad Católica Argentina (UCA) de Universidad Católica Argentina
id I33-R139123456789-2297
record_format dspace
institution Universidad Católica Argentina
institution_str I-33
repository_str R-139
collection Repositorio Institucional de la Universidad Católica Argentina (UCA)
language Inglés
Inglés
topic POLITICA MONETARIA
ECONOMIA ABIERTA
MODELOS
LIQUIDEZ
spellingShingle POLITICA MONETARIA
ECONOMIA ABIERTA
MODELOS
LIQUIDEZ
García-Cicco, Javier
On the quantitative effects of unconventional monetary policies in small open economies
topic_facet POLITICA MONETARIA
ECONOMIA ABIERTA
MODELOS
LIQUIDEZ
description This paper quantitatively evaluates the effects of several unconventional monetary policies for small open economies. In particular, a New Keynesian model is extended to include a liquidity premium, deviations from uncovered interest rate parity, and a premium in the term structure of interest rates, allowing the central bank to choose, in addition to its policy rate, the size and composition of its balance sheet. The model is calibrated to the case of Chile. We find that policies affecting the liquidity channel can potentially have large effects, but these depend on expectations about the future policy rate. On the other hand, alternatives working through the term premium have smaller effects, but they are less dependent on the expected path of the reference rate. We also study the possibility of undoing the unconventional policy as a possible exit strategy, with results indicating that this alternative may induce a significant slowdown, particularly if it is anticipated. Finally, we also consider the alternative of driving down the policy rate to its lower bound and maintaining it there for a prolonged period. While this policy can also be greatly expansionary, particularly after contractionary shocks, credibility issues regarding the promise of keeping the rate low for some time can severely undermine these effects...
format Artículo
author García-Cicco, Javier
author_facet García-Cicco, Javier
author_sort García-Cicco, Javier
title On the quantitative effects of unconventional monetary policies in small open economies
title_short On the quantitative effects of unconventional monetary policies in small open economies
title_full On the quantitative effects of unconventional monetary policies in small open economies
title_fullStr On the quantitative effects of unconventional monetary policies in small open economies
title_full_unstemmed On the quantitative effects of unconventional monetary policies in small open economies
title_sort on the quantitative effects of unconventional monetary policies in small open economies
publisher Banco Central de Chile
publishDate 2019
url https://repositorio.uca.edu.ar/handle/123456789/2297
work_keys_str_mv AT garciaciccojavier onthequantitativeeffectsofunconventionalmonetarypoliciesinsmallopeneconomies
bdutipo_str Repositorios
_version_ 1764820526234075140

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