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The impact of the use of unconventional monetary policy instruments of the Federal Reserve System in 2020–2022 on main macroeconomic indicators
Abstract
This study aims to assess the impact of the Federal Reserve System's monetary policy instruments on the key macroeconomic indicators in the United States From 2020 to 2022. To evaluate the impact of the implemented monetary policy instruments, a monetary policy indicator was constructed by adjusting the real Wu-Xia shadow interest rate with the estimate of natural rate of interest. Subsequently, the impact of the monetary policy indicator on the credit impulse level was determined. The final stage involved determining the effect of the credit impulse on changes in the level of macroeconomic variables. The conducted research showed that changes in monetary policy are reflected in changes in the constructed monetary policy indicator. The level of the credit impulse depends on the monetary policy indicator; the higher the value of the indicator (more restrictive monetary policy), the lower the level of the credit impulse, with greater variability. It was also established that changes in the credit impulse affect the variance in key macroeconomic variables. Credit data is very important in the context of future economic activity as well as financial stability because credit constitutes a stream of newly created money into the real economy. Monetary policy significantly influences the level of credit granted, encouraging borrowing in the case of low-interest-rate policies while discouraging it in the case of high-interest-rate policies. The pandemic period was characterized by significant data volatility, which translated into a decrease in the predictive value of the credit impulse.
Keywords:
monetary policy, Federal Reserve System, interest rates, unconventional monetary policy instrumentsJEL Codes
C12, C20, E43, E52, E58Details
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This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.