Universität zu Köln

Hörmann, Markus and Schabert, Andreas ORCID: 0000-0002-4924-9937 (2015). A Monetary Analysis of Balance Sheet Policies. The Economic Journal, 125 (589). 1888 - 1918. OXFORD: OXFORD UNIV PRESS. ISSN 1468-0297

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Abstract

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.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Hörmann, Markus UNSPECIFIED UNSPECIFIED UNSPECIFIED Schabert, Andreas UNSPECIFIED orcid.org/0000-0002-4924-9937 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-384674
DOI:	10.1111/ecoj.12167
Journal or Publication Title:	The Economic Journal
Volume:	125
Number:	589
Page Range:	1888 - 1918
Date:	2015
Publisher:	OXFORD UNIV PRESS
Place of Publication:	OXFORD
ISSN:	1468-0297
Language:	English
Faculty:	Central Institutions / Interdisciplinary Research Centers
Divisions:	Weitere Institute, Arbeits- und Forschungsgruppen > Center for Macroeconomic Research (CMR)
Subjects:	Economics
Uncontrolled Keywords:	Keywords Language INTEREST-RATES; RISK Multiple languages Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/38467