Work

Time Consistency and the Duration of Government Debt: A Signalling Theory of Quantitative Easing

Year: 2015

Type: report

Abstract: We present a signalling theory of Quantitative Easing (QE) at the zero lower bound on the short term nominal interest rate.QE is effective because it generates a credible signal of low future real interest rates in a time consistent equilibrium.We show these results in two models.One has coordinated monetary and fiscal policy.The other an independent central bank with balance sheet concerns.Numerical experiments show that the signalling effect can be substantial in both models.

Source: National Bureau of Economic Research

DOI: 10.3386/w21336

Authors: Saroj Bhattarai, Gauti Eggertsson, Bulat Gafarov

Institutions: HEC Montréal, National Research University Higher School of Economics, Pennsylvania State University, National Bureau of Economic Research, Emory University, Brown University, The University of Texas at Austin

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W1534814533

Cites: 42

Cited by: 103

Related to: 10