Unconventional Monetary Policy
Location
CBM 149
Department
Economics
Abstract
The Federal Reserve has significant control over several factors in the economy including their ability to indirectly affect certain targets through their actions and policies. The Federal Reserve has also developed many new strategies to affect certain targets, popularly known as unconventional monetary policy tools. Our research involves analyzing these different tools that the Federal Reserve has implemented since the recession of 2008. In particular, how these tools were actually used by comparing the actions that proceeded the recession with actions that followed it. This will build an understanding of how these tools affected the economy and how we are measuring their effectiveness. The unconventional monetary policy tools that we analyze include Interest on Reserves, Quantitative Easing, Balance Sheet Normalization, Margin Requirements, Forward Guidance, Open Market Operations, etc. We take an in-depth look at these tools to extend our understating of why they had a significant impact over other tools and why we continue to use some of them today. We also cover tools that were created but ultimately discontinued such as the Money Market Investor Funding Facility (MMIF), Commercial Paper Funding Facility (CPPF), and Primary Dealer Credit Facility. These tools are included in the study to specifically shed light on the ineffectiveness of these tools and to avoid any similar errors in the future, if any. The overall goal is to differentiate between why some of these tools were more effective than others in their efficiency to affect markets and the economy as a whole. Once that is established, a policy can be created for developing countries on what tools they can implement in order to boost their own economies. The usefulness of all these tools on the banking and investment side of business appeals to a wide audience. The study improves our understanding of how the actions of the Fed affect the economy in which we live in. It will also enhance greater economic literacy and an ability to better examine economic policy within the democracy that we live in.
Unconventional Monetary Policy
CBM 149
The Federal Reserve has significant control over several factors in the economy including their ability to indirectly affect certain targets through their actions and policies. The Federal Reserve has also developed many new strategies to affect certain targets, popularly known as unconventional monetary policy tools. Our research involves analyzing these different tools that the Federal Reserve has implemented since the recession of 2008. In particular, how these tools were actually used by comparing the actions that proceeded the recession with actions that followed it. This will build an understanding of how these tools affected the economy and how we are measuring their effectiveness. The unconventional monetary policy tools that we analyze include Interest on Reserves, Quantitative Easing, Balance Sheet Normalization, Margin Requirements, Forward Guidance, Open Market Operations, etc. We take an in-depth look at these tools to extend our understating of why they had a significant impact over other tools and why we continue to use some of them today. We also cover tools that were created but ultimately discontinued such as the Money Market Investor Funding Facility (MMIF), Commercial Paper Funding Facility (CPPF), and Primary Dealer Credit Facility. These tools are included in the study to specifically shed light on the ineffectiveness of these tools and to avoid any similar errors in the future, if any. The overall goal is to differentiate between why some of these tools were more effective than others in their efficiency to affect markets and the economy as a whole. Once that is established, a policy can be created for developing countries on what tools they can implement in order to boost their own economies. The usefulness of all these tools on the banking and investment side of business appeals to a wide audience. The study improves our understanding of how the actions of the Fed affect the economy in which we live in. It will also enhance greater economic literacy and an ability to better examine economic policy within the democracy that we live in.
Comments
Hardik Marfatia is the faculty sponsor of this project.