A Comparison Analysis Of Unconventional Monetary Policy’s Practice And Efficiency In USA, Euro Zone, Japan And Britain

Unconventional monetary policy refers to an innovative monetary policy which is taken by decreasing interest rates, enlarging the scale of central bank’s balance sheet, altering the structure of balance sheet and extending the duration of assets when conventional monetary policy loses efficacy. Quantitative easing monetary policy is one type of the unconventional monetary policy and took place in 2001 in Japan initially to alleviate the domestic deflation trend. Since the outbreak of financial crises on 2008, major economies in the world represented by the United States, Euro zone, Japan and Britain all have taken measures to stabilize the financial market, restrain economic recession and restore economy.United states, as the biggest economy globally, carries out four rounds of assets purchase and operation twist in a turn; European Central Bank, Bank of Japan and Bank of England also take steps to improve monetary market operation, increase market confidence and provide support for economic recovery. As United States is the source of financial crises with the most intensive monetary measures and largest scale, and at the same time Euro zone, Japan and Britain also adopt innovative financial tools based on respective national condition, a deep analysis on the practice and effectiveness of unconventional monetary policy and the transmission mechanism of balance sheet is beneficial for a clearer understanding of the unconventional monetary policy’s influence on financial market and macro economy and a better master of the policy’s operation mechanism, effects and limitation.This thesis will analyze the implementation and effectiveness of unconventional monetary policy from the perspective of theory analysis and empirical test. The first chapter will introduce the background, significance, literature review, structure, creative parts and future studies of the topic. Chapter two is a theoretical analysis which includes the definition, background, direct objective, final objective, policy tools and differences to conventional monetary policy. Chapter three will analyze and compare the practice of unconventional monetary policy of United States, Euro zone, Japan and Britain respectively. Chapter four will discuss the transmission mechanism of balance sheet first and then the changes of balance sheet’s scale and structure of the above four economies. In chapter five, the four economies’statistics before and after the financial crises, i.e. from Jan.2003 to Jun.2008 and from Jul.2008 to Jan.2016, will be used in SVAR model. By empirical test, impulse response and variance decomposition of M2, balance sheet of central bank and benchmark interest rate on GDP, CPI and unemployment rate will be analyzed and compared. Chapter six includes the conclusion and suggestion for central bank.