The transmission mechanism of unconventional monetary policy


  • Jakub Janus Cracow University of Economics



unconventional monetary policy, monetary transmission mechanism, central banking, quantitative easing


The implementation of unconventional (nonstandard) monetary policy instruments by the leading central banks at the wake of the financial and economic crisis was the most significant shift in the practice of central banking in the recent years. Evaluation of their effects is not feasible without a thorough recognition of the transmission mechanism of various balance-sheet policies, such as quantitative easing. The transmission channels of a standard interest-rate policy are based on a group of theories that are relatively coherent and well-documented. On the contrary, identification of similar framework for unconventional measures proved to be a complicated task. The aim of this paper is to extract and evaluate the theoretical efficiency of particular channels of unconventional monetary policy. This goal requires references to at least several, to some extent mutually exclusive, theories. It is also inevitable to draw one?s attention to the relative significance of identified channels, depending on the nature of used unconventional tools, as well as on reactions of financial institutions and other economic agents to undertaken actions. This paper discusses three broad channel of the unconventional policies transmission mechanism: the signaling channel, the liquidity channel, and the portfolio-balance channel.


Download data is not yet available.


Bauer, M., & Rudebusch, G. (2013). The Signaling Channel for Federal Reserve Bond Purchases. Federal Reserve Bank of San Francisco Working Paper Series, 21.
Bernanke, B., & Reinhart, V. (2004). Conducting Monetary Policy at Very Low Short-Term Interest Rates. American Economic Review, 94(2). DOI:
Borio, C., & Disyatat, P. (2009). Unconventional Monetary Policies: An Appraisal. BIS Working Papers, 292. DOI:
Bowdler, C., & Radia, A. (2012). Unconventional Monetary Policy: the Assessment. Oxford Review of Economic Policy, 28(4). DOI: 1093/oxrep/grs037.
Brunner, K., & Meltzer, A. (1968). Liquidity Traps for Money, Bank Credit, and Interest Rates. Journal of Political Economy, 76(1). DOI: 1086/259378.
Cecioni, M., Ferrero, G., & Secchi, A. (2011). Unconventional Monetary Policy in Theory and Practice. Questioni di Economia e Finanza, 102. DOI:
Cobham, D., & Kang, Y. (2012). Financial Crisis and Quantitative Easing: Can Broad Money Tell Us Anything?. The Manchester School, 80. DOI:
Curdia, V., & Woodford, M. (2010). The Central-Bank Balance Sheet as an Instrument of Monetary Policy. NBER Working Paper Series, 16208.
Dahlhaus, T. (2014). Monetary Policy Transmission during Financial Crises: An Empirical Analysis. Bank of Canada Working Paper, 21.
Eggertsson, G., & Woodford, M. (2003). The Zero Bound on Interest Rates and Optimal Monetary Policy. Brooking Papers on Economic Activity, 1. DOI:
Farmer, R. (2012). Qualitative Easing: How it Works and Why It Matters. NBER Working Paper Series, 18421.
Friedman, B. M. (2013). The Simple Analytics of Monetary Policy: A Post-Crisis Approach. NBER Working Paper Series, nr 18960. DOI: 80/00220485.2013.825109.
Joyce, M., & Tong, M. (2012). QE and the Gilt Market: A Disaggregated Analysis. Economic Journal, 122 (564). DOI: DOI: .02552.x.
Krishnamurty, A., & Vissing-Jorgensen, A. (2011). The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy. Brooking Papers on Economic Activity, 2. DOI:
Krugman, P. (1998). It?s Baaack: Japan?s Slump and the Return of the Liquidity Trap. Brookings Papers on Economic Activity, 2. DOI: .2307/2534694.
Lenza, M., Pill, H., & Reichlin, L. (2010), Monetary Policy in Exceptional Times. Economic Policy, 25(62). DOI:
Meltzer, A. (2001). Monetary Transmission at Low Inflation: Some Clues from Japan in the 1990s. Monetary and Economic Studies, Special Edition.
Reifschneider, D., & Williams, J. (2000). Three Lesson for Monetary Policy in a Low Inflation Era. Journal of Money, Credit and Banking, 32(4). DOI:
Rzońca, A. (2014). Kryzys banków centralnych. Skutki stopy procentowej bliskiej zera. Warszawa: C.H.Beck.
Szczerbowicz, U. (2014). The ECB's Unconventional Monetary Policies: Have they lowered market borrowing costs for banks and governments?. Rieti Discussion Papers, 14008.
Tobin, J. (1969). A General Equilibrium Approach to Monetary Theory. Journal of Money, Credit and Banking, 14(5). DOI:
Vayanos, D., & Vila, J.L. (2009). A Preferred-Habitat Model of the Term Structure of Interest Rates. NBER Working Paper Series, 15487.
Wallace, N. (1981). A Modigliani-Miller Theorem for Open Market Operations. American Economic Review, 71(3).
Wright, J. (2012). What Does Monetary Policy Do at the Zero Lower Bound?. Economic Journal, 122(564).




How to Cite

Janus, J. (2016). The transmission mechanism of unconventional monetary policy. Oeconomia Copernicana, 7(1), 7–21.




Similar Articles

1 2 3 4 5 6 7 8 9 10 > >> 

You may also start an advanced similarity search for this article.