What We've Learned About Unconventional Monetary Policy

What We’ve Learned About Unconventional Monetary Policy

In a recent BloombergView piece, Noah Smith writes that: “It’s becoming clearer that the Fed’s experiments during the Great Recession, dramatic as they were, taught us little about how monetary policy works.”  In this post, I argue an alternative perspective.  I describe three lessons that we’ve learned since late 2008:

1. unconventional monetary policy tools don’t have extreme downside risks
2. central banks can control inflation using unconventional tools
3. hitting inflation objectives may not translate into hitting growth objectives

(Admittedly, the last one is not exactly a new lesson.)

I’ll also mention one important residual question about long-term use of expansionary monetary policy.

Lesson 1: Even over relatively long periods of time, unconventional monetary policy tools don’t have extreme downside...

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