Abstract
This article discusses the immediate and the longer-term future of monetary policy. It first reviews the policies adopted by central banks in the wake of the financial crisis, focusing on balance sheet policies and forward guidance, and then discusses the exit from these policies and the associated challenges. Finally, an outlook on the possible long-term design of monetary policy is provided.
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Notes
The major exception being the swap agreements with foreign central banks, most notably the ECB. However, these operations addressed U.S. dollar requirements of non-U.S. banks.
Under the CBPP I, a nominal amount of EUR 60 billion was bought; the maximum amount of EUR 40 billion of the CBPP II was not fully utilized. At the end of March 2014, holdings of MBS and agency debt by the Federal Reserve stood at USD 1,650 billion, and they are still rising further.
Including the Bank of England and the Bank of Japan would not yield much different evidence.
In June 2013, FOMC Chairman Bernanke expected that the Fed would continue to reduce the pace of asset purchases in measured steps through the first half of 2014, ending purchases around midyear 2014.
For a thorough discussion, see Committee on the Global Financial System (2011).
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Acknowledgments
Special thanks to Clemens Jobst, Claudia Kwapil und Paul Pichler (all Austrian National Bank (OeNB)) for valuable discussions and contributions.
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Nowotny, E. The Future of European Monetary Integration. Atl Econ J 42, 229–242 (2014). https://doi.org/10.1007/s11293-014-9420-8
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DOI: https://doi.org/10.1007/s11293-014-9420-8