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Will unconventional policy be the new normal?

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Abstract

Unconventional monetary policies such as asset purchases and forward policy guidance have given the Federal Reserve much-needed tools when the traditional policy interest rate is near zero. Looking ahead to normal times, certain types of unconventional policies are best kept in reserve. If another situation arises where the Fed needs to call on these tools, it is ready and prepared to do so. ; This letter is adapted from a presentation by the president and CEO of the Federal Reserve Bank of San Francisco to the UC San Diego Economic Roundtable in San Diego, California, on October 3, 2013.

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  • John C. Williams, 2013. "Will unconventional policy be the new normal?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue oct7.
    • Handle: RePEc:fip:fedfel:y:2013:i:oct7:n:2013-29
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    1. Hess Chung & Jean‐Philippe Laforte & David Reifschneider & John C. Williams, 2012. "Have We Underestimated the Likelihood and Severity of Zero Lower Bound Events?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(s1), pages 47-82, February.
    2. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 215-287.
    3. Glenn D. Rudebusch & John C. Williams, 2008. "Revealing the Secrets of the Temple: The Value of Publishing Central Bank Interest Rate Projections," NBER Chapters, in: Asset Prices and Monetary Policy, pages 247-289, National Bureau of Economic Research, Inc.
    4. Eric T. Swanson, 2011. "Let's Twist Again: A High-Frequency Event-study Analysis of Operation Twist and Its Implications for QE2," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 151-207.
    5. Ben S. Bernanke & Vincent R. Reinhart & Brian P. Sack, 2004. "Monetary Policy Alternatives at the Zero Bound: An Empirical Assessment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2), pages 1-100.
    6. Campbell, John Y. (ed.), 2008. "Asset Prices and Monetary Policy," National Bureau of Economic Research Books, University of Chicago Press, number 9780226092119, April.
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    Cited by:

    1. William A. Barnett & Kun He & Jingtong He, 2022. "Consumption Loan Augmented Divisia Monetary Index and China Monetary Aggregation," JRFM, MDPI, vol. 15(10), pages 1-17, October.
    2. Cole, Stephen J., 2020. "The influence of learning and price-level targeting on central bank forward guidance," Journal of Macroeconomics, Elsevier, vol. 65(C).
    3. Florin O. Bilbiie, 2019. "Optimal Forward Guidance," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(4), pages 310-345, October.
    4. Cole, Stephen J. & Martínez-García, Enrique, 2023. "The effect of central bank credibility on forward guidance in an estimated New Keynesian model," Macroeconomic Dynamics, Cambridge University Press, vol. 27(2), pages 532-570, March.
    5. Vyshnevskyi, Iegor & Jombo, Wytone & Sohn, Wook, 2024. "The clarity of monetary policy communication and financial market volatility in developing economies," Emerging Markets Review, Elsevier, vol. 59(C).

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