The IS-LM-BB: A Model For Unconventional Monetary Policy

Authors

  • Waldo Mendoza Bellido [1] Professor and researcher at the Economics Department, PUCP. The author is grateful for the invaluable comments of Oscar Dancourt, Brazil

The Monetary policy of the United States has not been the same since the 2008-2009 international crisis. Following the crisis, given that the federal funds interest rate - the conventional monetary policy instrument - fell to almost zero, the Federal Reserve (FED) had to resort to two unconventional instruments: Firstly, an announcement on the future trajectory of the short-term interest rate. Secondly, direct intervention in the long-term bond market.