CROSS-BORDER TRANSMISSION OF UNCONVENTIONAL MONETARY POLICY

Abstract

To counter the intensifying financial crisis, monetary policy has increasingly used unconventional measures, because conventional measures have become less effective. Several central banks have developed and implemented an unconventional monetary policy set, to boost market liquidity and to stimulate economic growth. Although in the literature there is not a unanimous approach related to unconventional monetary policy measures, we considered the following classification: forward guidance, quantitative easing and credit easing. Neighter in the case of central banks, there is no standardization of unconventional policy measures, approaches are different, being adapted to the respective economies and structures. The type of unconventional measures is significantly different in the two sides of the Atlantic, because the economy financing is structurally different. However, it is unanimous that the volume of these unconventional measures is significant in all developed economies. International contagion of domestic monetary policy is felt worldwide, but its intensity varies from country to country, depending on cross-border transmission channels. In this paper we have tried to identify and analyze the transmission channels of unconventional measures: portfolio rebalancing channel, signalling channel, exchange rate channel, global financial markets, trade channel, international lending channel, confidence channel. This paper sets out a framework for unconvetional monetary policies, highlighting the channels of international spillovers. This analysis is very important because it shows which are the effects of unconventional monetary policy measures on the economies. Although unconventional policy actions have stimulated economic growth, it is clear that there is still a great uncertainty about the long-term effects of these policies. Given the uniqueness of the measures used, there are not known all the consequences. Therefore, knowledge and a better understanding of unconventional measures is nesessary, in order to ensure systemic stability. It is desirable for the future to limit massive unconventional actions, that appeared to be necessary during the crisis.

Keywords

• Unconventional monetary policy, International spillover, Central banks.