Managing Monetary Policy Normalization

Benigno, Gianluca; Benigno, Pierpaolo (2022). Managing Monetary Policy Normalization (Discussion paper series).

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We propose a new framework for monetary policy analysis to study monetary policy normalization when exiting a liquidity trap. The optimal combination of reserves and interest rate policy requires an increase in liquidity (reserves) a few quarters after the policy rate is set at the effective lower bound. Removal of accommodation requires that quantitative tightening starts before the liftoff of the policy rate. Moreover, the withdrawal of liquidity takes place at a very slow pace relative to the normalization of the policy rate.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Benigno, Pierpaolo

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

ISSN:

0265-8003

Series:

Discussion paper series

Language:

English

Submitter:

Julia Alexandra Schlosser

Date Deposited:

25 Oct 2022 16:37

Last Modified:

05 Dec 2022 16:27

BORIS DOI:

10.48350/174109

URI:

https://boris.unibe.ch/id/eprint/174109

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