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The consequences of exit from non-conventional monetary policy

Author

Listed:
  • Turner, Philip

    (Bank for International Settlements)

Abstract

This paper examines the financial and macroeconomic consequences of changes in central bank balance sheets. Large-scale purchases of bonds tend to drive down long- term interest rates. But developments in global markets, which shape the world long- term rate, exert some powerful constraints. Exchange rate effects can also be significant. The prospect of divergent balance sheet policies (balance sheet normalization by the Federal Reserve but further large purchases by the European Central Bank (ECB) and the Bank of Japan) is pushing the dollar up. Moving balance sheets toward more normal levels is important in order to preserve policy flexibility for the future but will present central banks with formidable challenges. This task will require cooperation with t reasuries without surrendering monetary policy independence. As central banks pragmatically monitor market resilience, the financial dominance trap is to be avoided.

Suggested Citation

  • Turner, Philip, 2015. "The consequences of exit from non-conventional monetary policy," Journal of Financial Perspectives, EY Global FS Institute, vol. 3(2), pages 43-59.
    • Handle: RePEc:ris:jofipe:0072
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    Cited by:

    1. Breedon, Francis, 2018. "On the transactions costs of UK quantitative easing," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 347-356.
    2. Philip Turner, 2016. "Macroprudential policies, the long-term interest rate and the exchange rate," BIS Working Papers 588, Bank for International Settlements.
    3. Peter Hördahl & Jhuvesh Sobrun & Philip Turner, 2016. "Low long-term interest rates as a global phenomenon," BIS Working Papers 574, Bank for International Settlements.

    More about this item

    Keywords

    Central Banks; exchange rate effects; financial markets;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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