Negative Implications of the Unconventional Monetary Policies in the Advanced Economies:Time for an Orderly Exit


Central banks in the United States, Japan, Great Britain and in the Eurozone have deployed new policy tools labeled “unconventional monetary policies”
both during and after the global financial crisis of 2008.These policies were designed to (a) prevent a collapse of the financial system by stabilizing financial markets via massive injection of cash into the system through direct liquidity provision and purchases of private assets, and (b) to provide monetary policy assistance through bond purchases to keep interest rates at zero or near zero. Clearly, these policies have helped support economic recovery. Nevertheless, the following sections show, these unconventional measures also carry potential unintended risks. Therefore, an orderly exit from these easy monetary conditions is essential.