Monetary-fiscal Interaction and Quantitative Easing

Download or read book Monetary-fiscal Interaction and Quantitative Easing written by Josef Hollmayr and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the monetary-fiscal interaction if the central bank conducts quantitative easing. Although asset purchases have similar effects on the real economy under monetary and fiscal dominance, wealth effects yield a qualitatively different response on the rate of inflation. Our results show that under fiscal dominance, unconventional monetary policy has similar effects to conventional monetary policy on inflation because these wealth effects exert downward pressure on prices. The longer the average maturity, the more volatile is the transmission of quantitative easing to the real economy.