Advancing the Monetary Policy Toolkit through Outright Transfers

Author/Editor:

Sascha Buetzer

Publication Date:

May 6, 2022

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

This paper argues that in reserve currency issuing economies at the effective lower bound, outright transfers from the central bank to households are both more equitable and more effective in achieving monetary policy objectives than asset purchases or negative interest rates. It shows that concerns pertaining to central banks’ policy solvency and equity position can be addressed through a careful assessment of a central bank's loss absorbing capacity and, if need be, tiered reserve remuneration policies. It also spells out key differences to a debt or money financed fiscal stimulus, which are particularly pronounced in a currency union without a central fiscal capacity. The paper concludes by discussing broader institutional, political, and legal considerations.

Series:

Working Paper No. 2022/087

Frequency:

regular

English

Publication Date:

May 6, 2022

ISBN/ISSN:

9798400209949/1018-5941

Stock No:

WPIEA2022087

Pages:

60

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