Behavioral expectations and inequality dynamics in macroeconomics Applications to central bank asset purchase policies

In recent decades, as short-term policy rates have been constrained by the effective lower bound, policymakers have increasingly relied on unconventional monetary policies to address various economic shocks affecting inflation and economic activity, as well as to ensure financial stability. This thesis evaluates the implications of central bank large-scale asset purchases, a critical component of these policies, with a focus on their effectiveness on macroeconomic and financial variables, distributional consequences, and optimal implementation in different conditions. Each chapter focuses on a different question related to these policies, using a framework adapted for this purpose.
Chapter 2 examines the ECB’s public sector purchase programme (PSPP) initiated in 2015, exploring its impact on economic activity and inflation, as well as income inequality through a New Keynesian framework with limited asset market participation. The results reveal that the PSPP successfully lifted output and inflation. While the overall impact of the program on income inequality was modest, it exhibited a non-monotonic profile.
Chapter 3 shifts focus to the influence of asset purchases on long-term government bond yields, framed within a behavioral model. This chapter highlights how financial market conditions, in particular volatility and the short-term interest rate, affect the effectiveness of these policies.
Finally, Chapter 4 addresses the optimal conduct of a normalization policy, including both the short-term interest rate and the balance sheet, when a central bank is confronted with persistent supply shocks. This chapter presents a model in which agents’ expectations may deviate from the rational expectation benchmark, using adaptive learning.