Quantitative Easing and Interest on Reserves: How Significant is it?

Abstract

This essay examines unconventional monetary policy with a view on payment of Interest On Excess Reserves (IOER) and how it is important in order to achieve the central bank targets.It starts by describing conventional monetary policy followed by an examination of modern monetary regimes which implement a corridor system in order to target interest rates. QE is introduced and advantages and disadvantages of IOER are outlined in detail.