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[KAEA-VSS] Macro Seminar, Feb. 9, 8PM Eastern Time (10AM Friday, KST)
February 9 @ 8:00 pm - 9:30 pm EST
KAEA Macro VSS
Time: Thursday, Feb. 9 8:00PM Eastern Time (10:00AM Friday in Korea)
Speaker: Joonseok Oh (Freie Universität Berlin)
“Optimal Monetary Policy Mix at the Zero Lower Bound” (w/ Dario Bonciani)
We study the optimal mix of forward guidance and QE at the ZLB. Welfare loss depends on inflation, output, and inequality between different households. When focusing only on inflation and output, the central bank excessively expands its balance sheet, which increases inequality. Forward guidance is more effective at stabilising inflation, and QE at stabilising output. The two tools are, therefore, complementary. Since each instrument cannot neutralise adverse demand shocks fully, the optimal policy combines the two. This results in a shorter ZLB duration and milder balance-sheet adjustments than if the central bank had access to only one policy instrument.
Meeting ID: 937 4136 0892