The effects of unconventional monetary policy on the Macroeconomy: A UK analysis

Christopher Ashwell and Aleksandar Vasilev

EERI Research Paper Series from Economics and Econometrics Research Institute (EERI), Brussels

Abstract: This paper studies the relationship between unconventional monetary policy and the wider macroeconomic variables in the UK. Using VAR and subsequent impulse response analysis, the impact of shocks to bond yields, which are used as a representation of unconventional monetary policy, the impact of unconventional monetary policy is assessed. The model used includes variables of 5- and 10-year bond yields, and variables representing GDP per capita, inflation, interest rates and net exports. The results of the impulse response analysis show the effectiveness of unconventional monetary policy in both an expansionary- and a contractionary use. The response to 5-year yield increases result in positive GDP per capita growth whereas an increase in 10-year yields result in a negative effect on GDP per capita. The results on inflation for increases in both bond yield types result in low levels of inflation. However, both bonds predict periods of deflation, especially the 10-year bond. The results of 5-year yield increases are in line with the literature and predict net exports to fall. However, the increase in 10-year yields has predicted periods of increased net exports. Overall, the empirical results suggest unconventional monetary policy is an effective tool for central banks.

Keywords: Unconventional Monetary Policy; Yield Curve; Quantitative Easing; Forward Guidance. (search for similar items in EconPapers)
JEL-codes: C32 E43 E52 E58 (search for similar items in EconPapers)
Date: 2026-01-06
New Economics Papers: this item is included in nep-cba and nep-mon
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Journal Article: The effects of unconventional monetary policy on the Macroeconomy: A UK analysis (2026)
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