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Unwinding: A Tale of Corridors and Floors

Published online by Cambridge University Press:  01 January 2020

Roger E.A. Farmer
Roger E.A. Farmer*
Affiliation:
National Institute of Economic and Social Research and University of Warwick
*
E-mail: [email protected]
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Abstract

I discuss six tools available to monetary policy makers. Three of these have been used since the inception of central banking. Three are new and were introduced in the aftermath of the 2008 financial crisis. I argue that, when the UK Monetary Policy Committee raises the interest rate, it should maintain a large balance sheet that consists of both risky and safe assets. Further, the Bank should trade the risk composition of its balance sheet to promote the stability of asset prices.

Keywords

unwindingcorridor policyfloor policyinterest ratemonetary policyE43E44
Type
Notes and Contributions
Information
National Institute Economic Review , Volume 241 , August 2017 , pp. R70 - R73
Copyright
Copyright © 2017 National Institute of Economic and Social Research

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