This paper summarizes the literature on the performance of various extended monetary policy tools when conventional policy rates are constrained by the effective lower bound. We highlight issues that may arise when these tools are used by central banks of small open economies.
How do changes to personal and corporate income tax rates in the United States affect its trading partners? Spillover effects from cuts in the two taxes differ. They are generally small and negative for corporate taxes, but sizable and positive for personal income taxes.
How should policy be designed at high debt levels, when fiscal authorities have little room to adjust taxes? Assigning the monetary authority a role in achieving debt sustainability makes it less effective in stabilizing inflation and output.
How should a central bank conduct quantitative easing (QE) in a monetary union when regions differ in their size and portfolio characteristics? Optimal QE policy suggests allocating greater purchases from the region that faces stronger portfolio frictions, and not necessarily according to each region’s size.
This paper compares the distributional effects of conventional monetary policy and quantitative easing (QE) within an estimated open-economy DSGE model of the euro area.
This paper finds that debt-financed government spending multipliers vary considerably depending on the location of the debt buyer. In a sample of 33 countries, we find that government spending multipliers are larger when government purchases are financed by issuing debt to foreign investors (non-residents), compared with when government purchases are financed by issuing debt to home investors (residents).
This paper estimates an open-economy dynamic stochastic general equilibrium model with Bayesian techniques to analyse the macroeconomic effects of the European Central Bank’s (ECB’s) quantitative easing (QE) programme. Using data on government debt stocks and yields across maturities, we identify the parameter governing portfolio adjustment in the private sector.
