This question is based on the article, Yield-curve control could prove a useful tool in the next
Question:
This question is based on the article, "Yield-curve control could prove a useful tool in the next recession," published by The Economist on February 1, 2020.
https://www.economist.com/finance-and-economics/2020/01/30/yield-curve-control-could-prove-a-useful-tool-in-the-next-recession
The article discusses the effectiveness of conventional and unconventional monetary policies and asks whether additional policy tools may be needed for dealing with the next recession.
Conventional monetary policies consist of open market operations and the discount rate and minimum reserve requirement adjustments, all of which are aimed at guiding short-term interest rates to desirable ranges. The unconventional monetary policies are other tools that central banks may use. The article mentions three unconventional monetary policies, namely, negative interest rates, quantitative easing (QE), and yield curve control.
- According to the article, how does quantitative easing work? What is the difference between QE and open market operations? What are the limitations of QE? [13 pts.]