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A repurchase agreement (repo) is a source of cash and collateral. We document that the money market is more segmented when the collateral motive prevails. Two crucial aspects of the central bank framework lead to this disconnect: banks' access to the central bank's deposit facility and assets' eligibility for quantitative easing (QE). We show that repo rates lent by banks with access to the deposit facility and secured by QE eligible assets are more collateral-driven and disconnected from funding-based money market rates. Our results are relevant for different monetary policies and have suggestive implications for the monetary policy pass-through. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

Summary: This paper evaluates the impact of quantitative easing on income and wealth of individual euro area households. We first estimate the aggregate effects of a quantitative easing (QE) shock, identified by means of external instruments, in a multi‐country vector autoregression (VAR) model with unemployment, wages, gross operating surplus, interest rates, house prices, and stock prices. We then distribute the aggregate effects across households using a reduced‐form simulation on micro‐data, which captures the portfolio composition, the income composition, and the earnings heterogeneity channels of transmission. The earnings heterogeneity channel is important: QE compresses the income distribution because many households with lower incomes become employed. In contrast, monetary policy has only negligible effects on the Gini coefficient for wealth: While high‐wealth households benefit from higher stock prices, middle‐wealth households benefit from higher house prices. [ABSTRACT FROM AUTHOR]

We introduce a new measure of the price charged by financial intermediaries for connecting mortgage borrowers with capital market investors. Based on administrative lender pricing data, we document that the price of intermediation reacts strongly to variation in demand, reflecting capacity constraints of mortgage originators. This positive comovement of price with quantity reduced the pass‐through of quantitative easing. We also find a notable upward trend in this price between 2008 and 2014, likely due to increased legal and regulatory burden in the mortgage market. The trend led to an implicit cost to borrowers of nearly $100 billion over this period. [ABSTRACT FROM AUTHOR]

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Purpose: This article analyzes the impact of monetary policy on income inequality across 16 advanced economies. The author investigates three key points: (1) the relationship between domestic monetary policy and domestic income inequality, (2) the spillover effect of USA monetary policy (including quantitative easing) on international inequality and (3) the quantitative influence of the monetary policies of both the USA and the Eurozone on the formation of domestic income inequalities. Design/methodology/approach: The author employed the Global Vector Autoregressive (GVAR) model, which uses Vector Autoregressive with Exogenous Variables (VARXs) models of each economy to build an integrated system that enables us to evaluate individual responses to global shocks. Findings: The author's analysis reveals that (1) contractionary monetary policy exacerbates domestic inequality and (2) USA monetary policy, including quantitative easing, affects international inequality. Furthermore, the author's variance decomposition analysis highlights that USA monetary policy is especially influential on income inequality in Norway and Sweden. Additionally, the cointegrating analysis confirms that monetary policy's impact on inequality persists in the long term. Originality/value: Most of the studies focused on investigating domestic economies as closed economies. However, the author's approach differs in that the author uses the GVAR, which treats all economies as open. This allows us to incorporate the world economy into the domestic dynamics and connect the economies using bilateral trade. Another advantage of the GVAR is that it captures spillover effects by modeling each economy and constructing the international economy. [ABSTRACT FROM AUTHOR]

The 2008 financial crisis and environmental issues are driving a profound change in economic governance. Over the last few decades, economic management has been marked by the neoliberal doctrine, which tends to use market forces as a tool for valuation, and to put the state at the service of the smooth running of the market. However, since the subprime crisis, interest rates have been placed under the strict surveillance of central banks through quantitative easing policies. Other events, such as the European energy crisis of 2022, show that market prices sometimes have to be circumvented. This article aims to define the principles of neoliberal governance and explain why it is in crisis today. It then sets out to develop four principles for a democratic economy, aimed at rearranging the relationship between the state and the market. [ABSTRACT FROM AUTHOR]

Quantitative easing policies have resulted in a significant increase in credit, posing a threat to developed countries' economic stability. This research aims to analyze the impact of distorted interest rates and readily available capital on creating "zombie firms" in the context of Mises–Hayek's malinvestment theory. The study highlights the importance of understanding these factors to prevent firm failure and recommends limited intervention in interest rates and capital availability before crises. Additionally, the study advocates for implementing flexible insolvency regimes for insolvent firms post‐crisis to mitigate the risk of corporate zombification. [ABSTRACT FROM AUTHOR]

We put forward a macro-financial empirical modeling framework that can examine the tails of distributions of macroeconomic variables and the implied risks. It does so without quantile regression, also allowing for non-normal distributions. The framework offers a number of relevant insights into higher moments of the US output growth distribution, as well as the effects of monetary policy and financial (risk premia) shocks on downside macroeconomic risk. This is not only from the short-run perspective but also from the long-run perspective, which has remained largely unexamined in the existing Macro-at-Risk literature. In particular, we estimate the short-run (conditional) and long-run US output growth distributions and study their evolution. The short-run analysis finds that monetary policy and financial shocks render the conditional output growth distribution asymmetric. As such, they affect downside risk over and above their impact on the conditional mean that policymakers routinely focus on. The long-run analysis indicates that US output growth left-tail risk showed a general downward trend in the two decades preceding the Global Financial Crisis (GFC), but this trend got reversed post-2008. Our examination strongly points to the adopted unconventional monetary policy framework featuring quantitative easing as a potential source of elevated long-run downside tail risk in the post-GFC period. [ABSTRACT FROM AUTHOR]

This study evaluates the impact of unconventional policy announcements by the European Central Bank (ECB) on the interconnectedness of sovereign credit default swaps (SCDS) markets in the European Union (EU) from 2009 to 2014. The findings suggest that ECB's unconventional policy measures reduced sovereign default risk not only in Eurozone nations but also in Central and Eastern European countries. To investigate the transmission of monetary policy effects across European countries, we employ the Diebold & Yilmaz connectedness framework along with an event-study approach. Our analysis reveals robust evidence of substantial positive spillovers from ECB monetary policy measures to all EU countries, effectively shielding the SCDS market from adverse shocks. Among various policy tools, we observe that asset purchase programs enhance overall connectedness, while mixed policy measures bolster within-cluster connectedness. Furthermore, our results highlight the efficacy of specific monetary policy instruments, indicating that asset purchase programs and quantitative easing are particularly effective in reducing sovereign risk. [ABSTRACT FROM AUTHOR]

There is something disingenuous, something hypocritical in the vociferous critiques of Modern Monetary Theory (MMT). The hypocrisy among neoliberal economists reveals itself in tacitly accepting quantitative easing (QE) while criticizing MMT. QE involves creating money to purchase treasury bonds and mortgage-backed securities, benefiting primarily asset holders. MMT involves creating money to employ people, attaining full employment. Neoliberalism rejects Keynesian interventionism, instead advocating using government to channel market forces in ways that benefit corporations and the affluent. The dynamic stochastic general equilibrium (DSGE) model incorporates the neoliberal vision in showing the irrelevance of fiscal policy in achieving full employment. Problems with the DSGE model revealed themselves in its inability to explain the great financial crisis. Nevertheless, neoliberal economists seek to retain the DSGE model while rejecting MMT. The article further contrasts QE with MMT, showing the similarities and difference between the Fed purchasing assets and the government engaged in functional finance. Governments throughout the world are resorting to creating money to increase employment and sustain their economies, policies advocated by MMT. Keywords: modern monetary theory, Great Financial Crisis, quantitative [ABSTRACT FROM AUTHOR]

The global food prices have surged to historical highs, and there is no consensus on the reasons behind this round of price increases in academia. Based on theoretical analysis, this study uses monthly data from January 2000 to May 2022 and machine learning models to examine the root causes of that period's global food price surge and global food security situation. The results show that: Firstly, the increase in the supply of US dollars and the rise in oil prices during pandemic are the two most important variables affecting food prices. The unlimited quantitative easing monetary policy of the US dollar is the primary factor driving the global food price surge, and the alternating impact of oil prices and excessive US dollar liquidity are key features of the surge. Secondly, in the context of the global food shortage, the impact of food production reduction and demand growth expectations on food prices will further increase. Thirdly, attention should be paid to potential agricultural import supply chain risks arising from international uncertainty factors such as the ongoing Russia-Ukraine conflict. The Russian-Ukrainian conflict has profoundly impacted the global agricultural supply chain, and crude oil and fertilizers have gradually become the main driving force behind the rise in food prices. [ABSTRACT FROM AUTHOR]

The $1 billion open‐market operation conducted by the Federal Reserve, at the height of the Great Depression, was a successful precedent to the recent Quantitative Easing (QE) programs. The 1932 program entailed large purchases of medium‐ and long‐term securities over a 4‐month period. An event study analysis indicates that the program dramatically lowered medium‐ and long‐term Treasury yields. A segmented markets model is used to analyze the effects of the open‐market purchases on the economy. A significant degree of financial market segmentation is estimated, and partly explains the observed upturn in output growth. Had the Federal Reserve continued its operations and used the announcement strategy used in QE1, the Great Contraction could have been attenuated earlier. Our historical analysis suggests that the Federal Reserve in 2008 had a good predecessor to its actions. [ABSTRACT FROM AUTHOR]

This paper examines the effects of quantitative easing (QE) announcements by emerging market central banks in Europe during the COVID-19 pandemic, particularly on exchange rates with a higher frequency setting. Two different methodologies are used for analysing the policy announcement effects. The first methodology is the event study method that measures the sample exchange rates' mean and cumulative mean abnormal return around the time of event. The second one is the time series approach that measures asymmetric behaviour of the exchange rate volatility to monetary policy shocks by employing exponential GARCH model. The results show that the foreign exchange markets respond to QE announcements in all selected countries. The response of exchange rates varies across countries and event windows. QE announcements cause appreciation of domestic currency in Hungary and Poland, and depreciation in Turkey. Additionally, the QE announcements increase exchange rate volatility in Hungary and Poland while they reduce volatility in Turkey. The asymmetric behaviour of domestic currencies prevails in all selected countries, but this asymmetry is sensitive to the exchange rate and the length of the window. [ABSTRACT FROM AUTHOR]

Using multinomial logit methodology for financing application decisions for bank loans, credit lines and trade credits, we show that firms' financial behavior is driven by their lagged experience. Moreover, the optimism and pessimism of firms (animal spirit) is another important determinant. Our results stress the importance of the behavioral perspective to corporate finance. The policy of quantitative easing of the ECB had only weak effects on the access to banking loans, while it was significantly correlated with lower internal funding. Our results have possible implications to understand the behavioral dynamics of corporate financing structure the in the post pandemic period. [ABSTRACT FROM AUTHOR]

This paper examines the spillover effects of U.S. unconventional monetary policy (UMP) on emerging market capital flows and asset prices. Affine term structure model estimates show that U.S. monetary policy shocks, identified with high-frequency Treasury futures data, represent revisions to expected short-term yields and term premia, especially during the UMP period. The policy shocks exhibit sizable effects on U.S. holdings of emerging market assets. These effects disproportionately manifest through valuation changes versus physical flows, are more pronounced for equity relative to bond markets, and are asymmetric between the quantitative easing and tapering periods, with flows more important during the unwinding. [ABSTRACT FROM AUTHOR]

We study quantitative easing (QE) policies from a microstructure perspective, drawing on intraday transaction-level data for German bonds (purchased under the Eurosystem's QE program). An initial analysis of purchase decisions reveals that portfolio managers consider liquidity and the scarcity of securities in repo markets. Suggestive of significant flow effects, we detect price impacts of purchases at high and low frequencies. We find the impact on market liquidity and functioning to be ambiguous. A higher purchase volume lowers transaction costs but has an adverse impact on order-book depth. The price impact varies with market conditions and is higher for more illiquid bonds. [ABSTRACT FROM AUTHOR]

We need to talk about inflation: 14 urgent lessons from the last 2,000 years Even today, inflation is frequently discussed in the media without quantitative easing (QE) being mentioned. The Bank of England kept interest rates at 0.1 per cent until December 2021, by which time inflation had exceeded 5 per cent, and then raised them in a series of small, tentative steps while inflation flew into double digits. [Extracted from the article]

This paper offers general guidelines for central bank capital management. Capital adequacy is important to be a credible, independent monetary authority over a medium-term horizon. Central banks, however, face several challenges in determining their capital adequacy. Firstly, the amount of capital only plays an auxiliary role in central banks' effectiveness given that they cannot default as long as they have the right to issue legal tender. Secondly, central banks face two types of financial risks: calculable risks from current exposures and latent risks from future exposures. These latent risks, in particular, are difficult to quantify because they stem from contingent policy measures such as quantitative easing and lending of last resort. It is argued that a central bank's target level of capital (1) can be calibrated with a confidence level that is lower than that used for commercial banks and (2) takes latent risks into account that are related to GDP or the size of the financial sector in the economy. [ABSTRACT FROM AUTHOR]

The article focuses on the importance of pension funds for financial stability, emphasizing their impact on other financial institutions and the economy. It highlights a few topics: the vulnerability of pension funds to short-term shocks, their pro-cyclical behaviour during crises, and their role in market imbalances and reduced efficiency. The UK gilt crisis serves as a case study, leading to a recommendation to broaden the scope of macroprudential policy to include pension funds.

This article researched the effect of the unconventional monetary policy tool of quantitative easing (QE), commonly used by the world's leading central banks (Federal Reserve and European Central Bank) after the COVID-19 pandemic crisis, on financial and reel markets. The purpose of QE is to inject money into the economy with the aim of stimulating nominal spending. This effect occurs through expectations and the use of credit. The article presents experiences based on data from the Federal Reserve and European Central Bank. Data show that the QE policy applied during the COVID-19 pandemic in the USA and European region had significant effects on total demand, inflation and GDP. [ABSTRACT FROM AUTHOR]

Rising public debt everywhere has raised the question of how to reduce debt again in the future. High public debt also seems to be an impediment for the exit of central banks from ultra‐low interest rates and quantitative easing. Historical precedents and proposals have included austerity, haircuts and the generation of inflation. Each way has advantages and disadvantages, including uncertainty about effects and side effects. We approach the issue from an historical perspective, based on case studies of prominent approaches to debt reduction. We analyse debt reduction through economic austerity in Italy, hyperinflation in Germany after World War I, inflation in Argentina since the 1980s, currency reform in Germany after WW II, and financial repression in the United States and the United Kingdom after WW II. Finally, we discuss Ronald McKinnon's order of economic and financial liberalisation as well as the Chicago Plan combined with the introduction of central bank digital currencies as an option for the future. [ABSTRACT FROM AUTHOR]

Quantitative easing (QE) programs have driven unprecedented expansions in the supply of central bank reserves around the world over the past two decades, fundamentally changing the implementation of monetary policy. The collapse in money multipliers following QE episodes has often been interpreted as implying banks are happy to passively hold most of the reserves created by QE. This paper develops a simple microsimulation model of the banking sector that adapts the traditional money multiplier model and allows for bank reserve demand to be inferred from monetary aggregates. The model allows the use of unwanted reserves by banks to play out over time alongside QE purchases and incorporates both significantly higher reserve demand after 2008 and capital constraints. With these additions, the model explains the persistently lower money multipliers seen in the United States following QE, as well as the growth in commercial bank deposits. The model suggests the demand from banks for reserves has increased substantially since the introduction of QE but not to the point where banks are passively absorbing all newly created reserves. [ABSTRACT FROM AUTHOR]

This paper analyzes the Bank of Canada's (BoC) pandemic-era quantitative easing (QE) programs and their distributive implications, focusing on the Canadian housing market. First, we analyse the priorities and effects of QE: increasing liquidity and encouraging lending and borrowing. Next, we identify the sectors of the economy most influenced by QE, highlighting that investment in real estate soared in comparison to other sectors. Finally, we present a case study of real estate transactions in Toronto, finding that the increased investment in residential and multi-family housing worked to the detriment of marginalised populations. In spatializing macrofinance and identifying monetary policy's role in geographies of housing, we call for increased attention to central banks and the distributional effects of monetary policy. [ABSTRACT FROM AUTHOR]

This paper examines the effect of the Federal Reserve's quantitative easing (QE) on the cost of bank loans and documents large heterogeneous effects across different firms. In QE1, the average loan spread is 22.7 percent lower compared to the non‐QE period. This effect falls in QE2 and OT and then rises in QE3 and the tapering period. The rates of riskier loans are restrained more than less risky loans during QEs as banks take more risks by offering lower rates to attract risky borrowers. The Fed mortgage‐backed securities purchases have a larger impact in narrowing the borrowing cost difference between riskier and safer loans than the Fed Treasury purchases. Our results are robust to borrower, year‐quarter and bank fixed effects. Overall, our findings support that the risk‐taking channel of QE plays a significant role in the corporate bank loan market. [ABSTRACT FROM AUTHOR]

Excessive money creation during the Covid pandemic has resulted in Britain's worst episode of inflation since 1990–91. The backdrop to this failure of monetary policy is the Bank of England's aggregate demand/aggregate supply framework together with the Monetary Policy Committee's neglect of broad money. An alternative way to operate monetary policy is urgently needed. A significantly improved monetary policy outcome could be achieved by shifting from trying to steer the economy using interest rates and quantitative easing or quantitative tightening to reliance on the relative stability of income velocity (the ratio of nominal GDP to broad money) as a means of managing aggregate demand. [ABSTRACT FROM AUTHOR]

Economic supply shocks and fiscal expansion coupled with monetary expansion are suspected causes of the rise in inflation that we observe in most of the developed and developing economies today. In this paper we look at the effect of the government budget deficit(surplus) or fiscal policy stance, and quantitative easing on inflation while controlling for economic shocks using the method of cointegration as we find data series in our model to be integrated of order one and having support of one cointegrating equation between the variables. Our analysis is performed using Federal Reserve monthly data from 1994 to 2022 using Two-Step Engle-Granger (1987) method and Fully Modified OLS by Phillips and Hansen (1990). We compare these models to Auto Regressive Distributed Lag model of Pesaran and Shin (1998) which allows for analysis irrespective of the order of integration to provide for more robustness regarding the estimated relationships in cases of misspecification of stationary properties in our time series. Both cointegrating models lend support to the initial postulated relationship where expansionary fiscal policy has significant positive impact on the price level during the long run but also enhances the effect of the Quantitative Easing on the price level as the interaction term between these variables is significant, indicating that during the periods of expansionary fiscal policy, expansionary monetary policy through Quantitative easing has bigger effect. Our analysis is performed controlling for effect of economic shocks and price of real exchange rate on the price level. Stability of the cointegration model tests reveal presence of structural breaks which when included in the cointegrating equation change the importance of the impact that fiscal stance has on inflation and reveal that inflation is mainly result of the expansion in central bank assets after 2008, which coincides with period of unconventional monetary policy. [ABSTRACT FROM AUTHOR]

Mortgage dollar roll, the most common financing strategy for agency MBS, differs from repo in that the returned collateral can differ from those received. Also, MBS ownership changes hands in the funding period. We show that dollar roll "specialness," how much implied financing rates fall below MBS repo rates, (1) increases in the value of the cheapest-to-deliver option, (2) decreases in the leverage of primary dealers, (3) decreases in prepayment risk exposure during the financing period, and (4) decreases in MBS returns. The Federal Reserve's dollar roll sales in quantitative easing operations are associated with lower specialness. Received February 3, 2016; editorial decision July 30, 2018 by Editor Itay Goldstein. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

We quantify the scarcity value of Treasury collateral by estimating the impact of security-specific demand and supply factors on the specific collateral repurchase agreement (repo) rates of all outstanding U.S. Treasury securities. We find a positive and significant scarcity premium for on- and off-the-run Treasuries that persists for approximately 3 months and is larger in magnitude for shorter-term securities. This scarcity effect seems to pass through to Treasury cash market prices, providing additional evidence for the scarcity channel of quantitative easing (QE). On the contrary, the Federal Reserve's reverse repo operations could help reduce the scarcity premium by alleviating potential shortages of high-quality collateral. [ABSTRACT FROM AUTHOR]

This study examines the time‐frequency causal link between economic policy uncertainty and inflation in Japan while answering the following questions: (i) is there any causal link between economic policy uncertainty and inflation in Japan? (ii) if yes, in which direction(s)? To the best of our knowledge, this is the first study that conducts this nexus. To do so, this study employs the wavelet coherence causality test and focuses on the wide range period from 2003:03 to 2021:03, in which Japan was experienced the specific Quantitative and Qualitative Monetary Easing Policies. Overall, the findings mirror that economic policy uncertainty is an essential predictor of inflation in Japan, and economic policy uncertainty leads to inflation at different periods and frequencies. The results of this study are crucial for policy decision‐making, monetary authorities, and central banks, and Japan should reduce uncertainty about economic policies to curb the possible risk of inflation rises. The policymakers in Japan can control the inflation rate fluctuation if they can ensure a more reliable prediction of economic policies. [ABSTRACT FROM AUTHOR]

During the global financial crisis, central banks in advanced economies cut policy rates to near zero, and then provided further stimulus via balance sheet expansion. In many instances this took the form of quantitative easing — central banks creating new money with which to purchase securities. With years of quantitative easing behind us, and aggressive measures from central banks during the COVID-19 pandemic, should investors now expect central banks to backstop financial markets? This paper examines asset purchases from the twin perspectives of monetary and financial stability, and argues that investors should not expect central banks to always come to their rescue. [ABSTRACT FROM AUTHOR]

Social scientists have recently shown how markets are discursively constructed and have documented the role of central banks in these constructions. Although framed as a critique of the neoclassical economic view, this approach still operates within a narrow vision of the world as divided into distinct political, social and economic spheres. Our goal in this paper is to replace this view with an exchange-based understanding of agency and relationality. The puzzle of our paper is one that has captivated academics and practitioners alike: Why did the market respond so powerfully to the Bank of Japan Governor Haruhiko Kuroda's quantitative easing in 2013? Our focus is on the proliferation within the market and wider society of 'expectations'. A multiplicity of expectations, of different orders, different kinds, different scales, and different targets folded together to generate the efficacy of this event in central bank politics. [ABSTRACT FROM AUTHOR]

OLD VIEWS ABOUT CENTRAL BANK INDEPENDENCE If these circumstances went a long way to defining the world environment in which the consensus on central bank independence appeared, there were also very notable developments in economic research. By the time the Labour government, elected in 1997, surprised the world just days after the election with a plan for independence of the Bank of England, dozens of other central banks had already been made independent, or created as independent central banks, and Britain had become notorious for lagging behind this global trend. When something with a behavioural aspect was introduced to the assessment of central bank independence, it sometimes turned out to be only an opportunity for circularity, such as when it was discovered by Cukierman et al. (1992) that in developing countries inflation was unrelated to the statutory measures that had proved so satisfactory in making the case for independence in developed countries, but was related to the turnover rate of central bank governors. A much-cited specific example is that a central bank will promise to deliver low inflation in the hope of inducing the private sector to set low wage increases; but if it does, the central bank can, by allowing inflation to rise, achieve a desirable fall in unemployment. [Extracted from the article]

A line of defense of quantitative easing (QE) policies has been developed around empirical evidence that time series models do not predict long-term asset prices and yields as well as naive random walk forecasts, implying that predictions of price reversals cannot be profitable and, therefore, that QE effects are not reversed. However, in this work we present evidence that for the Eurozone, Sweden, and the UK, which have pursued QE interventions, a random walk does not beat a Markov switching regimes model in out-of-sample forecasting and, at the same time, the switching process provides additional information regarding the likelihood of price reversals, thus inducing market participants to offset the effects of QE interventions whenever they perceive unconventional monetary policy regimes as temporary. [ABSTRACT FROM AUTHOR]

We develop a three-factor no-arbitrage model for valuing mortgage-backed securities in which we solve for the implied prepayment function from the cross-section of market prices. This model closely fits the cross-section of mortgage-backed security prices without needing to specify an econometric prepayment model. We find that implied prepayments are generally higher than actual prepayments, providing direct evidence of significant macroeconomic-driven prepayment risk premiums in mortgage-backed security prices. We also find evidence that mortgage-backed security prices were significantly affected by Fannie Mae credit risk and the Federal Reserve's quantitative easing programs. [ABSTRACT FROM AUTHOR]

The relationship between the environment and climate change on one hand and the financial system, financial regulation and monetary policy on the other is growing in importance. This paper examines the possible impact of the European Central Bank's monetary policy of quantitative easing on the environmental policy of the European Union. Using data from Climate Bonds Initiative, the paper analyses the variation in the amount of "green labelled bonds" issued in the individual member countries of the Eurozone areas, as a function of liquidity inducing monetary policy variables. The paper finds a positive and significant relationship between the two measures. [ABSTRACT FROM AUTHOR]

This research assesses the impact of global monetary shocks stemming from quantitative easing policies in advanced economies on exchange rate volatility in emerging markets. Using panel ARDL (Autoregressive Distributed Lag) model, an asymmetric effect is detected showing that increases in quantitative easing have a significant impact on exchange rate volatility, whereas subsequent tapering does not. Moreover, the Fragile Five economies experience spikes in exchange rate volatility that are more than double what is detected in other emerging markets. Finally, the impact of foreign exchange intervention to offset the effect on volatility is significant across emerging markets and is, once again, larger in the Fragile Five economies. The results are supported using panel VAR (Vector Autoregression) estimations. [ABSTRACT FROM AUTHOR]

This paper investigates the evolution of unconventional monetary policies under a binding zero lower bound (ZLB) constraint for the U.S. economy. In doing so, this study provides a comprehensive empirical assessment on the economic and statistical implications of allowing conventional and unconventional monetary policies to work in mutually exclusive union using shadow rates. Shadow rate Taylor rules and policy counterfactuals implied by time‐varying coefficient structural vector autoregression (VAR) models show: (i) one can reconcile plausible economic results using shadow rates when short‐term interest rates approach the ZLB and (ii) unconventional monetary policies are a viable response to recession and facilitate stability during economic recovery. [ABSTRACT FROM AUTHOR]

This article employs a Markovian regime-switching autoregressive approach to examine triangular arbitrage across forex and cryptocurrency markets during the coronavirus disease 2019 crisis. The findings suggest the following: (1) profitable triangular arbitrage tends to occur in the turbulent period during the crisis, significantly outperforming cryptocurrency investments; and (2) the persistent profitability of triangular arbitrage ensues from strong memory of high returns, low risk, and shock response to global quantitative monetary easing policy. Regulatory authorities should consolidate cryptocurrency supervision systems and establish cross-border coordination mechanisms to stabilize exchange rates and enhance market efficiency. [ABSTRACT FROM AUTHOR]

In contrast, increasing the supply of reserves could inhibit bank lending when scarce bank equity or regulatory constraints make it costly for banks to expand. After using bank income statement and balance sheet data to show that credit and deposit market power has become concentrated in the hands of large banks, the authors demonstrate how these institutions differ from smaller banks in response to monetary contractions. Credit easing in a fundamentals-induced crisis leads to more banks defaulting rather than repaying deposits, as the attenuating increase in asset prices reduces the value of repayment by asset-buying banks. Similarly, all banks raise their deposit markups (where increases in interest rates widen the spreads they charge on deposits, leading to fewer deposits and reduced lending capacity), but large banks raise them less. [Extracted from the article]

Bank's exposure to large-scale asset purchases, as measured by the relative prevalence of mortgage-backed securities on their books, affects lending following unconventional monetary policy shocks. Using a difference-in-differences identification strategy, this paper finds strong effects of the first and third round of quantitative easing (QE1 and QE3) on credit. Highly affected commercial banks increase lending by 2% to 3% relative to their counterparts. QE2 had no significant impact, consistent with its exclusive focus on Treasuries sparsely held by banks. Overall, banks respond heterogeneously and the type of asset being targeted is central to QE. [ABSTRACT FROM AUTHOR]

In the article "Rethinking economic sovereignty," Leon Wansleben discusses Keith Hart's essay on the rise and fall of national capitalism. Hart argues that the strong connection between mass industrial capitalism and state power that emerged during the Second Industrial Revolution is now dissolving, leading to the demise of national capitalisms. Wansleben raises questions about the relationship between national capitalisms and the global order, highlighting how American imperialism has both supported and hindered the development of national capitalisms in different regions. Wansleben also explores the relationships between corporate, market, and state power in an increasingly fractured, imperialist world. The article concludes by acknowledging the challenges of finding a formula that balances the demands for democracy and welfare with the forces of capitalism. [Extracted from the article]

The effectiveness of government policies and economic stimuli during the 2007 financial crisis and the COVID-19 pandemic are compared in this study. While the 2007 financial crisis started in the real estate market and spread through the contagion effect to other sectors, the pandemic halted the all sectors of the global economy simultaneously. In the United States, where the social safety net is not as strong as other advanced economies, the unemployment rate skyrocketed and many families lost income. The federal government countered with various relief packages, which have been, unlike the rounds of quantitative easing prevalent after the 2007 financial crisis, direct payments to households and businesses. The Agent Instability Indicator and default elasticity coefficient are used to quantitatively assess the financial instability and default risk of subgroups of United States households classified by percentile of income and net worth. It turns out that the financial instability level of the United States household during the pandemic has not been as high as that during the 2007 crisis and the Great Recession. It is concluded that the direct handout of cash—so called helicopter money—is more effective at preventing financial collapse and stabilizing the economy than quantitative easing through asset purchase. [ABSTRACT FROM AUTHOR]

The article informs about central banks' unconventional tools in times of economic crises, such as quantitative easing and large-scale lending programs, their potential political and distributional impacts, and challenges to central bank independence. Topics include the historical evolution of the Treasury-Fed relationship, the expansion of the Fed's lending powers, and the restrictions imposed by the Dodd-Frank Act following the 2008 financial crisis.

This paper investigates the relative importance and effect of conventional and unconventional Canadian monetary policy surprises on housing prices. Using a credible approach to identify structural monetary policy shocks in Canada and a comprehensive Bayesian VAR model to analyze their effects on financial and macroeconomic variables, we find that both conventional monetary policy and quantitative easing shocks have a significant and persistent effect on housing prices in Canada. However, the inflationary effect of a quantitative easing shock is more pronounced than that of an easing target monetary policy surprise. Specifically, the peak effect of a 25-basis point expansionary conventional monetary policy shock is a 2.30% increase in real housing prices while a comparable quantitative easing surprise leads to a peak of 4.56% increase in real housing prices. We conclude that expansionary monetary policy in various forms has had significant inflationary effects on Canadian housing prices. But quantitative easing surprises stand out as the most prominent contributory factor to the escalating Canadian real estate price. Quantitative easing impact consistently outweighs the effects of forward guidance and conventional monetary policy shocks. • Identifies Canadian monetary policy shocks, both conventional and unconventional. • Analyzes impact on housing prices using Bayesian VAR for new insights. • Quantitative easing (QE) impacts housing prices more than conventional shocks. • A 25bps conventional shock raises housing prices by 2.30%; QE by 4.56%. [ABSTRACT FROM AUTHOR]

The impact of unconventional monetary policies adopted by advanced economies in the wake of the Global Financial Crisis has had far reaching implications for global economic conditions. Although several transmission channels of quantitative easing to financial market and exchange rate conditions have been identified, there is a lack of empirical investigation on the spillover effects to exports for emerging market economies. The research presented in this paper focuses on assessing the asymmetric transmission of unconventional monetary policy in the US on exports for fifteen emerging market economies. Employing the panel ARDL (Autoregressive Distributed Lag) model, we find that the increase in large-scale asset purchases in the US corresponds to a decline in exports in the emerging market economies. The effect on exports is more sizable in the Fragile Five than in the other 10 emerging markets. Finally, although monetary policy shocks from the US transmit to impact trade in emerging markets, the effect is asymmetric. Specifically, the tapering of the quantitative easing does not have a statistically significant effect on exports. [ABSTRACT FROM AUTHOR]