Unconventional Monetary Policy and Beyond

Open Access
Author:
Neely, Dane William
Area of Honors:
Economics
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Russell Paul Chuderewicz, Thesis Supervisor
  • David Shapiro, Honors Advisor
Keywords:
  • Unconventional monetary policy
  • conventional monetary policy
  • effectiveness of monetary policy
Abstract:
Stagnant economic growth since the Great Recession has led to an important questioning of the Federal Reserve’s ability to significantly impact real gross domestic product through monetary policy. To provide insight as to why the Federal Reserve’s influence has waned recently, this thesis explores the effectiveness of monetary policy over the last forty years. Utilizing a myriad of analytical methods, I show that monetary policy has become weaker over time, and now has little, if any, influence on real output. By presenting important economic concepts relating to monetary policy from relevant literature, and by conducting a quantitative analysis using ordinary least squares regressions, Granger causality, vector autoregressions, and impulse response functions, this thesis demonstrates the Federal Reserve’s lack of influence over the business cycle, and the increasing neutrality of monetary policy.