Quantitative easing in a monetary union

Francesco Saraceno and Roberto Tamborini

Oxford Economic Papers, 2020, vol. 72, issue 1, 124-148

Abstract: The long season of unconventional monetary policies in advanced economies seems to be coming to an end. How can quantitative easing (QE) be effective where conventional monetary policy fails? How does it work in the peculiar environment of a monetary union? We study this latter case modelling a monetary union as the aggregate of two countries characterized by New Keynesian output and inflation relationships, with a Tobinian money market equation. QE is operated by the single central bank by expanding money supply in exchange for risky assets throughout the union. We assess the stabilization capacity of QE under different types of symmetric and asymmetric shocks, in which case fiscal accommodation at the country level should also intervene.

JEL-codes: E3 E4 E5 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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