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The theory of unconventional monetary policy

Farmer, Roger E.A and Zabczyk, Pawel (2016) The theory of unconventional monetary policy. CFM discussion paper series (CFM-DP2016-11). Centre For Macroeconomics, London, UK.

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This paper is about the effectiveness of qualitative easing, a form of unconventional monetary policy that changes the risk composition of the central bank balance sheet with the goal of stabilizing economic activity. We construct a general equilibrium model where agents have rational expectations and there is a complete set of financial securities, but where some agents are unable to participate in financial markets. We show that a change in the risk composition of the central bank’s balance sheet will change equilibrium asset prices and we prove that, in our model, a policy in which the central bank stabilizes non-fundamental fluctuations in the stock market is Pareto improving and self-financing.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2016 The Authors
Divisions: Centre for Macroeconomics
Subjects: H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Centre for Macroeconomics
Date Deposited: 13 Dec 2017 10:00
Last Modified: 25 Jan 2021 00:58

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