Unconventional Monetary Policy: Conclusion (8)

KEYNOTE LECTURE AT THE INTERNATIONAL CENTER FOR MONETARY AND BANKING STUDIES (ICMB),
GENEVA, 28 APRIL 2009

HOW ARE UNCONVENTIONAL MEASURES IMPLEMENTED?

1 Direct Quantitative Easing

2 Direct Credit Easing

3 Indirect (or Endogenous) Quantitative/Credit Easing

Conclusions

To conclude, the decision whether to embark on non-conventional monetary policy measures, which specific ones and for how long depends on a series of considerations, including

• the overall conditions of the economy, in particular the presence of deflationary pressures and 
• the effective constraint provided by the zero lower bound for interest rates, 
• the structure of the financial flows in the economy, 
• the medium term incentives that would be created for the private sector and 
• the risks entailed in the exit strategy, including for the independence and credibility of the central bank. 

Some measures present greater advantages, in terms of providing the right incentives and being easily reversible. 

Others present more risks and have to be well targeted and used under specific circumstances. 

Considering the pros and cons of the various measures requires deep thinking. 

I have tried to develop tonight some of the considerations underlying such a reflection.

Hopefully this has been useful in understanding why the ECB has proceeded speedily in some areas while taking the necessary time to reflect on others.

Thank you very much for your attention.

https://www.ecb.europa.eu/press/key/date/2009/html/sp090428.en.html?fbclid=IwAR3l-HERTcR1afdIISMWCe0owxInfKY2zF5O5L4E-pfpADWdhAt4W6Z-Ux0

Conventional and unconventional monetary policy
Lorenzo Bini Smaghi,
Member of the Executive Board of the European Central Bank,
Keynote lecture at the International Center for Monetary and Banking Studies (ICMB),
Geneva, 28 April 2009