The Economic Logic of the Yield-Curve Control Policy*

Publication Name

Economic Papers


Unconventional monetary policies are currently implemented in several advanced economies. One of them is known as “yield-curve control,” a policy presently active in Australia. Ordinary pictorial descriptions of this policy do not usually discuss the market mechanism presupposed by the yield-curve control approach nor the economic logic underpinning the expected outcome of this policy tool. The present letter adopts a pedagogical approach and provides an exposition of yield-curve control that separates the immediate effects of the policy from their concomitant economic effects on spending and portfolio investment.

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