On The Quantitative Effects Of Unconventional Monetary Policies

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This paper quantitatively evaluates the effects of several unconventional monetary policies. In particular, a new Keynesian model of a small-open economy is extended to include a liquidity premium, deviations from the uncovered interest rate parity condition, and a premium in the term structure of interest rates; allowing the Central Bank to set, in addition to the policy rate, the stock of base money, debt at different maturities and foreign assets. The model is calibrated to the case of Chile. The authors find that policies affecting the liquidity channel can potentially have a big effect, but they depend on expectations about the future policy rate.