1. General topic
Over the last of decades, the monetary policy in advanced economies has fundamentally relied on the control of the benchmark interest rates to achieve its main objectives of controlling inflation and fostering economic growth and employment. During this period, the control of the benchmark interest rate was done through open market operations, monetary aggregates and exchange rates were free to adjust and market expectations were driven by a transparent central bank reaction function. Moreover, the transmission channels and monetary policy lags were relatively well understood.
In the aftermath of the 2008 financial crisis, the monetary policy paradigm was challenged along 2 main dimensions: (i) the financial disruptions hindered the channels through which interest rate changes impact the yield curve, asset prices and credit spreads and (ii) the nominal benchmark interest rates reached the so-called zero lower bound (ZLB), making it impossible for Central Banks to stimulate economies using traditional policy instruments.
The reaction of Central Banks in advanced economies came in the form of the so-called Unconventional Monetary Policies (UMP), which includes the expansion of the central bank’s role as lenders of last resort, forward policy guidance and large-scale asset purchases (LSAP). On the one hand, the expansion of central bank’s role as lender of last-resort has the main objective of avoiding bank runs and the collapse of confidence. On the other hand, the forward policy guidance and LSAPs have the main objective of providing further monetary policy accommodation in the zero lower bound by targeting the long-term yields.
Mainly due to the inherent uncertainty regarding this new set of monetary policies, their effects and possible unintended consequences have been extensively debated in the literature. Understanding the impacts of these policies is crucial not only for future implementation of monetary policy but also to design the best reversal options of the current monetary conditions.
2. What questions do you want to answer?
During my graduate studies I want to focus my research on Unconventional Monetary Policies implemented in the United Kingdom (focusing on the impacts of Asset Purchase Programs 1 and 2 and the Funding for lending scheme (FLS)), the United States (focusing on the impacts of the three LSAPs implemented since 2009) and Japan (focusing on the impacts of the Quantitative and Qualitative Monetary Easing Programs). I would separate my research interest in the following three topics:
(i) The impacts of unconventional monetary policies on the GDP, inflation and unemployment.
(ii) The impacts of unconventional monetary policies in the different production sectors of the economy.
(iii) Possible options to reverse the current monetary conditions.
3. Key literature and its limitations
Several estimates of the impacts of unconventional monetary policies, especially LSAPs, have been...