Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)
Unconventional US Monetary Policy: New Tools, Same Channels?
() and Florian Huber
Abstract: In this paper we compare the transmission of a
conventional monetary policy shock with that of an unexpected decrease in
the term spread, which mirrors quantitative easing. Employing a
time-varying vector autoregression with stochastic volatility, our results
are two-fold: First, the spread shock works mainly through a boost to
consumer wealth growth, while a conventional monetary policy shock affects
real output growth via a broad credit / bank lending channel. Second, both
shocks exhibit a distinct pattern over our sample period. More
specifically, we find small output effects of a conventional monetary
policy shock during the period of the global financial crisis and stronger
effects in its aftermath. This might imply that when the central bank has
left the policy rate unaltered for an extended period of time, a policy
surprise might boost output particularly strongly. By contrast, the spread
shock has affected output growth most strongly during the period of the
global financial crisis and less so thereafter. This might point to
diminishing effects of large scale asset purchase programs.
Keywords: Unconventional monetary policy, transmission channel, Bayesian TVP-SV-VAR; (follow links to similar papers)
JEL-Codes: C32,; E52,; E32; (follow links to similar papers)
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