Hoermann, Markus and Schabert, Andreas (2015). A MONETARY ANALYSIS OF BALANCE SHEET POLICIES. Econ. J., 125 (589). S. 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:
CreatorsEmailORCIDORCID Put Code
Hoermann, MarkusUNSPECIFIEDUNSPECIFIEDUNSPECIFIED
Schabert, AndreasUNSPECIFIEDUNSPECIFIEDUNSPECIFIED
URN: urn:nbn:de:hbz:38-384674
DOI: 10.1111/ecoj.12167
Journal or Publication Title: Econ. J.
Volume: 125
Number: 589
Page Range: S. 1888 - 1918
Date: 2015
Publisher: OXFORD UNIV PRESS
Place of Publication: OXFORD
ISSN: 1468-0297
Language: English
Faculty: Unspecified
Divisions: Unspecified
Subjects: no entry
Uncontrolled Keywords:
KeywordsLanguage
INTEREST-RATES; RISKMultiple languages
EconomicsMultiple languages
URI: http://kups.ub.uni-koeln.de/id/eprint/38467

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