Cui, W;
Sterk, V;
(2021)
Quantitative easing with heterogeneous agents.
Journal of Monetary Economics
10.1016/j.jmoneco.2021.07.007.
(In press).
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Abstract
We study the effects of Quantitative Easing (QE) in a heterogeneous-agents model with liquid and partially liquid wealth, and nominal rigidities. The direct macroeconomic effect of QE is determined by the difference in marginal propensities to consume out of the two types of wealth, which is large according to empirical studies. Therefore, the effects of QE on aggregate output and inflation are significant, according to the model. Indeed, the estimated model reveals that QE interventions greatly dampened the U.S. Great Recession, by expanding household liquidity. However, QE may have strong and adverse distributional effects, compared to interest rate policy.
| Type: | Article |
|---|---|
| Title: | Quantitative easing with heterogeneous agents |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/j.jmoneco.2021.07.007 |
| Publisher version: | https://doi.org/10.1016/j.jmoneco.2021.07.007 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Monetary policy, Large-scale asset purchases, Household liquidity |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10133342 |
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