Unconventional Monetary Policy: Interest Rates and Low Inflation. A Review of Literature and Methods

Mariarosaria Comunale and Jonas Striaukas

No 13, Bank of Lithuania Occasional Paper Series from Bank of Lithuania

Abstract: In this paper we provide an overview of the different approaches identified to capture monetary policy in a period of Zero Lower Bound (ZLB). We focus here on the methods closely linked to interest rates, which include: spreads, synthetic indices from principal component analysis and different shadow rates. In the second section of this review we calculate these measures for the euro area and also draw comparisons among different approaches and look at the effects on main macroeconomic variables, with a special focus on inflation. The impact of unconventional monetary policy shocks on inflation is found to be significantly positive by the majority of the studies and by using different methods. Ultimately, we provide a summary of the literature on the Natural Real Rate of Interest, which may be useful for assessing how long low (real) interest rates in a ZLB may stay in place; also suggesting some possible improvement in the estimations which would lead to more accurate policy recommendations.

Keywords: Unconventional monetary policy; zero lower bound; shadow rates; natural interest rate; inflation (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 F42 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2017-02-24
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Working Paper: Unconventional monetary olicy: interest rates and low inflation. A review of literature and methods (2017)
Working Paper: Unconventional monetary policy: interest rates and low inflation: A review of literature and methods (2017)
Working Paper: Unconventional monetary policy: interest rates and low inflation. A review of literature and methods (2017)
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