Marcin Bielecki, Michał Brzoza-Brzezina, Marcin Kolasa, 12 October 2021

By boosting labor incomes and asset prices, a monetary easing is often believed to benefit the vast majority of households. This column argues that this intuition is misleading, because the effect of asset price changes for households depends not just on asset holdings, but on their maturity structure, which is largely driven by life-cycle motives. A typical monetary policy easing redistributes welfare from older to younger generations. Moreover, the resulting asset price appreciation is harmful for households that accumulate housing and save for retirement.

Viral Acharya, Guillaume Plantin, 22 July 2020

In the aftermath of the 2008 Global Crisis, ultra-low US policy rates have been coincident with significantly large positive shareholder payouts by US firms while investment growth has failed to keep pace with firm assets, leading to assertions of a causal link between the two trends. This column uses a parsimonious model to explain how a socially undesirable yet shareholder value-maximising crowding out of business investment by payouts can arise as an unintended consequence of aggressive monetary easing.

Emily Liu, Friederike Niepmann, Tim Schmidt-Eisenlohr, 02 February 2020

After the Global Crisis, accommodative monetary policy also eased financial conditions in emerging market economies. This column shows that US banks contributed to the transmission of US monetary policy and that regulation and supervision attenuated it. Only US banks that performed well in the Fed’s annual stress tests expanded their lending to emerging markets in response to monetary easing. Banks that performed poorly left their lending unchanged.

Sayuri Shirai, 16 October 2018

The Bank of Japan has bought massive quantities of Japanese stocks in a bid to increase aggregate demand and inflation, and to encourage Japanese savers to take on more risk. This column surveys the effectiveness of this quantitative easing programme and identifies several key issues, including stock prices not rising in proportion to profits, the overvaluation of some small-cap stocks, and adverse impacts on corporate governance. It argues that before taking any steps toward monetary policy normalisation, the Bank of Japan should introduce flexibility in interpreting the 2% price stability target.

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