Cross-country macro evidence on the effectiveness of unconventional monetary policies in a low interest rate environment

Monday, March 27, 2017 - 3:30pm

Jouchi Nakajima - Bank for International Settlements


Have unconventional monetary policies (UMPs) become less effective in a low interest rate environment? Based on a time-varying parameter VAR approach, the paper examines effectiveness of UMPs through a bank lending channel for the United States, the United Kingdom, the euro area and Japan. As the nominal rates remain exceptionally low, the UMPs have been subject to diminishing “bang for the monetary policy buck” over time. However, we find evidence that an interest-rate pass-through to lending rate and a link between the lending rate and macroeconomy have not broken down in the low interest rate environment.

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