We extend a standard New Keynesian model to allow an analysis of "unconventional" dimensions of policy alongside traditional interest-rate policy. We find that quantitative easing in the strict sense is likely to be ineffective, but that targeted asset purchases by a central bank can instead be...

We extend the basic (representative-household) New Keynesian [NK] model of the monetary transmission mechanism to allow for a spread between the interest rate available to savers and borrowers, that can vary for either exogenous or endogenous reasons. We find that the mere existence of a...