The Folk Theorem of Decreasing Effectiveness of Monetary Policy: What Do the Data Say?

Ugo Panizza and Charles Wyplosz

Russian Journal of Money and Finance, 2018, vol. 77, issue 1, 71-107

Abstract: It is increasingly claimed that unconventional monetary policies are subject to decreasing effectiveness in supporting growth and raising the inflation rate. There are good reasons to believe that the effects of further asset purchases by central banks and of moving the interest rate deeper in negative territory progressively decline. But has it been happening? This paper attempts to provide an answer. Looking at the Eurozone, the UK, the US and Japan, it uses different approaches (local projection and Bayesian VAR) on different sub-samples. The evidence is mixed. Policy interventions proxied by the shadow policy rate seem to be subject to the decreasing effectiveness hypothesis. However, this is not the case for QE announcements.

Keywords: unconventional monetary policy; zero lower bound; shadow policy rate (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://rjmf.econs.online/upload/iblock/1f9/RJMF_77-01_ENG_Panizza.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bkr:journl:v:77:y:2018:i:1:p:71-107

DOI: 10.31477/rjmf.201801.71

Access Statistics for this article

Russian Journal of Money and Finance is currently edited by Ksenia Yudaeva

More articles in Russian Journal of Money and Finance from Bank of Russia Contact information at EDIRC.
Bibliographic data for series maintained by Olga Kuvshinova ().