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The Role and Effectiveness of Unconventional Monetary Policy

dc.contributor.authorPeter Morgan
dc.date.accessioned2015-04-10T10:16:45Z
dc.date.available2015-04-10T10:16:45Z
dc.date.issued2009-11-15
dc.identifier.urihttp://hdl.handle.net/11540/3751
dc.description.abstractThis paper reviews the effectiveness of unconventional monetary policies and their relevance for emerging markets. Such policies may be useful either when interbank rates fall to zero, or when a credit crunch or rise in risk premium impairs the normal transmission mechanism of monetary policy. Unconventional monetary policy measures encompass three broad categories: (i) commitment effect, i.e., verbal commitments to maintain very low interest rates for a certain period, either conditionally or unconditionally; (ii) quantitative easing, i.e., targeting the level of current account balances of the central bank; and (iii) qualitative or credit easing, which involves purchases of targeted assets to lower rates and/or increase liquidity in the target market. It also examines issues related to the exit strategy from unconventional policy, and assesses the applicability of unconventional policies for Asian economies other than Japan. Most studies of the commitment effect (or duration effect) suggest that statements by a central bank regarding the duration of a policy of very low or zero interest rates also affect market expectations of interest rates, but the impact is mainly limited to shorter-term rates. The literature on the effects of quantitative easing monetary policy is less conclusive, especially when one accounts for other announcements by the central bank. Regarding qualitative easing (credit easing) policy, the effect of expanding outright purchases of government bonds on bond yields looks limited. However, other kinds of asset purchase interventions do seem to have been more successful in relieving market stresses. For Asian countries aside from Japan, unconventional policies look most attractive as a way to relieve funding blockages in specific markets rather than to stimulate overall growth. Only India; Republic of Korea; Singapore; and Taipei,China adopted unconventional measures, and those of the middle two were chiefly related to their use of the Fed’s swap line for United States dollars to ease dollar shortages in the region. However, if growth of United States consumption slows structurally, this may force Asian economies to rely more on unconventional monetary policy measures during future downturns.
dc.languageEnglish
dc.publisherAsian Development Bank
dc.rightsCC BY 3.0 IGO
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.titleThe Role and Effectiveness of Unconventional Monetary Policy
dc.typeWorking Papers
dc.subject.expertMacroeconomic
dc.subject.expertMacroeconomic Analysis
dc.subject.expertMacroeconomic Framework
dc.subject.expertMacroeconomic Models
dc.subject.expertMacroeconomic Performance
dc.subject.expertMacroeconomic Planning
dc.subject.expertMacroeconomic Policies
dc.subject.expertMacroeconomic Reform
dc.subject.expertMacroeconomic Stabilization
dc.subject.adbSocial condition
dc.subject.adbEconomic dependence
dc.subject.adbEconomic assistance
dc.subject.adbInternational monetary relations
dc.subject.adbInternational monetary relations
dc.subject.adbInternational trade
dc.subject.adbNational accounting
dc.subject.adbMarket
dc.subject.naturalExchange
dc.subject.naturalComparative economics
dc.subject.naturalIndex number
dc.subject.naturalMonetary policy
dc.subject.naturalValue analysis
dc.subject.naturalAdjustment cost
dc.subject.naturalTransaction cost
dc.subject.naturalConditionality
dc.subject.naturalInternational relations
dc.title.seriesADBI Working Paper Series
dc.title.volume163
dc.contributor.imprintAsian Development Bank
oar.themeEconomics
oar.adminregionAsia and the Pacific Region
oar.countryBangladesh
oar.countryBhutan
oar.countryIndia
oar.countryMaldives
oar.countryNepal
oar.countrySri Lanka
oar.countryBrunei Darussalam
oar.countryCambodia
oar.countryIndonesia
oar.countryLao People's Democratic
oar.countryMalaysia
oar.countryMyanmar
oar.countryPhilippines
oar.countrySingapore
oar.countryThailand
oar.countryViet Nam
oar.countryCook Islands
oar.countryFiji Islands
oar.countryKiribati
oar.countryMarshall Islands
oar.countryFederated States of Micronesia
oar.countryNauru
oar.countryPalau
oar.countryPapua New Guinea
oar.countrySamoa
oar.countrySolomon Islands
oar.countryTimor-Leste
oar.countryTonga
oar.countryTuvalu
oar.countryVanuatu
oar.countryAfghanistan
oar.countryArmenia
oar.countryAzerbaijan
oar.countryGeorgia
oar.countryKazakhstan
oar.countryKyrgyz Republic
oar.countryPakistan
oar.countryTajikistan
oar.countryTurkmenistan
oar.countryUzbekistan
oar.countryPeople's Republic of China
oar.countryHong Kong
oar.countryChina
oar.countryRepublic of Korea
oar.countryMongolia
oar.countryTaipei,China
oar.identifierOAR-004226
oar.authorMorgan, Peter
oar.importtrue
oar.googlescholar.linkpresenttrue


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    The Asian Development Bank Institute (ADBI) Working Paper series is a continuation of the formerly named Discussion Paper series which began in January 2003. The numbering of the papers continued without interruption or change. ADBI was established in 1997 in Tokyo, Japan, to help build capacity, skills, and knowledge related to poverty reduction and other areas that support long-term growth and competitiveness in developing economies in Asia and the Pacific.

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