Acceso usuarios
[1]
México
We analyze unconventional monetary policy tools, most notably large-scale asset purchases in the form of long-term public debt, that have greatly expanded central bank’s balance sheets for more than a decade now. Additionally, considering that banking systems in major economies have experienced rising market concentration, this paper examines how competition in the banking sector influences the effectiveness of expansionary balance sheet policies in stimulating credit market activity. The analysis shows that under perfect competition, higher money growth lowers interest rates and increases lending, particularly when the crowding-out effects of government debt are limited. Likewise, central bank bond purchases consistently support credit expansion. In contrast, under monopoly banking, higher money growth tends to reduce funding costs and encourage lending except when the opportunity cost of holding money is low and liquidity shocks are substantial.
