Unconventional Monetary Policies in the Euro Area, Japan, and the United Kingdom

an article by Giovanni Dell’Ariccia, Pau Rabanal and Damiano Sandri (International Monetary Fund, Washington, DC) published in Journal of Economic Perspectives Volume 32 Number 4 (Fall 2018)

Abstract

The global financial crisis hit hard in the euro area, the United Kingdom, and Japan. Real GDP from peak to trough contracted by about 6 percent in the euro area and the United Kingdom and by 9 percent in Japan.

In all three cases, central banks cut interest rates aggressively and then, as policy rates approached zero, deployed a variety of untested and unconventional monetary policies. In doing so, they hoped to restore the functioning of financial markets, and also to provide further monetary policy accommodation once the policy rate reached the zero lower bound.

In all three jurisdictions, the strategy entailed generous liquidity support for banks and other financial intermediaries and large-scale purchases of public (and in some cases private) assets. As a result, central banks' balance sheets expanded to unprecedented levels.

This paper examines the experience with unconventional monetary policies in the euro zone, the United Kingdom, and Japan.

The paper starts with a discussion of how quantitative easing, forward guidance, and negative interest rate policies work in theory, and some of their potential side effects. It then reviews the implementation of unconventional monetary policy by the European Central Bank, the Bank of England, and the Bank of Japan, including a narrative of how central banks responded to the crisis and the evidence on the effects of unconventional monetary policy actions.

JEL Classification: E23, E32, E43, E44, E52, G01, H63

Full text (PDF 26pp)

---

How to teach ... debt

This week (actually this was last week) on the Guardian Teacher Network, you can find lots of fun activities to tie in with My Money Week.

My Money Week is run by the Personal Finance Education Group (PFEG). The annual themed week provides a focus on financial capability for young people in primary and secondary schools so they can learn more about managing money in a practical and relevant way.

The week’s aim is to weave finance education into the curriculum, says the chief executive, Wendy van den Hende. “It’s vital for young people to leave school with the ability to manage their money so they don’t get into difficulties. With mortgages and rising university fees, debt is an everyday part of our life. We advise schools to do something substantial on finance education each year so children can understand the territory.”

The Guardian Teacher Network offers free access to more than 70,000 pages of lesson plans and interactive materials. This content is being added to every day by teachers and specialists. 33,000 teachers have already registered. To see (and share) for yourself, go to teachers.guardian.co.uk

---

Debt management

Adviser: a guide to benefits, housing, employment and money advice (Number 144 March/April 2011) is “must read” for me.

This publication is produced by Citizens Advice, largely written by staff of the organisation for staff and volunteers. However, each issue has something of more general interest – often more than one.

New proposals to help people ion financial difficulties would streamline the process of debt management and deliver a better and fairer deal for customers, says the British Bankers’ Association (BBA) and Accenture.
The report, A New Model for Dealing with Personal Debt (PDF 20pp not easy to read online), says that a clearer range of options for people working to resolve their debt would avoid confusion and worry. The report calls for greater consistency in the way debt advice if provided and in how creditors deal with customers in financial difficulties. …

---