Essays on unconventional monetary policy

Abstract

English: Following the Global Financial Crisis of 2007 { 2010, central banks around the world were forced into unprecedented policy interventions to stabilise asset markets and prevent the global nancial system from collapsing. Because interest rates around the world were at historical lows, \conventional" interest rate policy was not an option. Central banks, led by the US Federal Reserve, resorted to \unconventional" monetary policies, rst to stabilise markets during the height of the crisis, and then to support the economic recovery thereafter. The distinguishing characteristic of these unconventional policies was that they involved direct intervention by central banks in long-term xed income markets, such as government bonds and agency debt. This thesis considers the theoretical channels through which central bank purchases of long-term securities could impact (i) bond yields, (ii) other domestic asset markets, and (iii) spillovers to foreign countries. The theory is then tested and evaluated against the empirical evidence. Based on the empirical results, a simple closed-economy DSGE model is constructed. The model captures and illustrates the transmission from central bank asset purchase shocks to the aggregate economy. The asset purchase shock is subsequently converted to an endogenous balance sheet rule. Simulations show that combining this unconventional (balance sheet) rule with a conventional (short-term interest rate) rule yields a superior policy mix than under the conventional rule alone. Finally, the closed-economy model is extended to an open-economy framework, within which a similar balance sheet rule is evaluated in the context of international capital

ows. Again, the combination of the balance sheet and interest rate policy is found to yield a superior outcome than interest rate policy alone. The contribution of this thesis is twofold. It contributes to the understanding of the impact of central bank interventions in xed income markets on long-term yields, as well as the externalities and spillovers to other asset markets. Furthermore, this thesis develops a robust and versatile framework, which is intuitively easy to grasp, within which various aspects of central bank balance sheet policy could be investigated. This thesis' main conclusion is that unconventional monetary policy could complement conventional policy under normal market conditions, and that unconventional policy need not be restricted to crisis times only.

Sepedi: Ka morago ga Mathata a Ditšhelete a Lefase ka Bophara a 2007 - 2010, dipanka tša bogareng lefaseng ka bophara di ile tša gapeletšega go ba le ditsenogare tša melawana tše di bego di se tša emelwa ka nepo ya go bea sekeng mebaraka ya dithoto le go thibela lenaneo la ditšhelete la lefase ka bophara gore le se phuhlame. Ka lebaka la gore dikelo tša tswala lefaseng ka bophara di be di le fase fao go sego gwa ka gwa bonwa, melawana ya kelo ya tswala ya "tlwaelo" e be e se yeo e ka dirišwago. Dipanka tša bogareng, tše di etilwego pele ke Resefe ya Feterale ya US, di ile tša diriša melawana ya ditšhelete yeo e "sego ya tlwaelo", sa mathomo go bea mebaraka sekeng ka nakong ya mathata, le gape go thekga tsošološo ya ekonomi ka morago ga fao. Seemo seo se farologanyago sa melawana ye e sego ya tlwaelo e bile gore e akareditše tsenogare ya thwii ka dipanka tša bogareng ka go mebaraka ya letseno ya lebaka le letelele ya go se fetoge, ya go swana le diponte tša mmušo le sekoloto sa tšhoganetšo. Thesese ye e lekodišiša ditšhanele tša teori tšeo ka tšona dipanka tša bogareng di rekago ditšhireletšo tša lebaka le letelele di ka amago (i) ditšweletšo tša diponte, (ii) mebaraka ye mengwe ya dithoto tša ka nageng, le (iii) go fetela le ka dinageng tše dingwe. Teori ye ka go realo e a lekwa le go sekasekwa mabapi le bohlatse bjo bo hwetšwago. Go ya ka dipoelo tša bohlatse, mokgwa o bonolo wa ekonomi ye e tswaletšwego wa DSGE o a hlangwa. Mokgwa wo o akaretša le go laetša phetišetšo go tloga go bothata bja theko ya dithoto ka panka ya bogareng go ya go ekonomi ya bogareng. Bothata bja theko ya dithoto mafelelong bo fetošetšwa go molawana wa palantshešiti ya ka gare. Dikekišo di laetša gore go kopanya molawana wo o sego wa tlwaelo (palantshešiti) le molawana wa tlwaelo (kelo ya tswala ya lebaka le lekopana) go tšweletša kopanyo ya melawana ya godingwana go feta ka fase ga molawana wa tlwaelo fela. Sa mafelelo, mokgwa wa ekonomi ye e tswaletšwego o katološetšwa go motheo wa ekonomi ye e bulegilego, wo ka gare ga wona molawana wo o swanago wa palantshešiti o sekasekago ka seemong sa dikoloto tša letlotlo tša boditšhabatšhaba. Gape, kopanyo ya palantshešiti le melawana ya kelo ya tswala go hweditšwe gore e tšweletša poelo ya godingwana go feta melawana ya kelo ya tswala e nnoši. Seabe sa thesese ye se gabedi. E tsenya letsogo go kwešišo ya seabe sa ditsenogare tša panka ya bogareng ka go mebaraka ya letseno la go se fetoge go ditšweletšo tša lebaka le letelele, gammogo le go dikantle le diphetišetšo go mebaraka ye mengwe ya dithoto. Godimo ga fao, thesese ye e tšweletša motheo wo o tiilego le wa go akaretša tše ntši, wo o lego bonolo go kwešišwa, wo ka gare ga ona dikarolo tša melawana ya mehutahuta ya palantshešiti ya panka ya bogareng e ka nyakišišwago. Mafetšo a magolo a thesese ye ke gore melawana ya ditšhelete ye e sego ya tlwaelo e ka akaretša melawana ya tlwaelo ka fase ga maemo a tlwaelo a mebaraka, le gore melawana ye e sego ya tlwaelo e hloka gore e dirišwe fela go dinako tša mathata fela.

Afrikaans: Na die wêreldwye finansiële krisis van 2007–2010 is sentrale banke regoor die wêreld gedwing om ongekende beleidsintervensies toe te pas om batemarkte te stabiliseer en te verhoed dat die wêreldwye finansiële stelsel ineenstort. Omdat rentekoerse wêreldwyd op historiese laagtepunte was, was "konvensionele" rentekoersbeleid nie 'n opsie nie.