Unconventional Monetary Policy in a Small Open Economy

Margaux MacDonald () and Michal Popiel

Open Economies Review, 2020, vol. 31, issue 5, No 5, 1115 pages

Abstract: Abstract We investigate unconventional monetary policy in a small open economy using shadow interest rates to capture policy at the zero lower bound (ZLB) in a Bayesian structural vector autoregressive model for Canada - a useful case where foreign shocks can be proxied by the U.S. alone. We estimate that during the ZLB period, on average, Canadian unconventional monetary policy increased output by 0.13 percent, while US unconventional monetary policy increased Canadian output by 1.2 percent on average. Results demonstrate the effectiveness of domestic unconventional monetary policy and the strong spillovers from foreign unconventional monetary policy in a small open economy.

Keywords: Small open economy; Unconventional monetary policy; Bayesian structural VAR; Zero lower bound; International monetary policy transmission (search for similar items in EconPapers)
JEL-codes: E52 E58 F42 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (10)

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Working Paper: Unconventional Monetary Policy in a Small Open Economy (2017)
Working Paper: Unconventional Monetary Policy In A Small Open Economy (2016)
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DOI: 10.1007/s11079-020-09583-6

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