Abstract

This paper offers information regarding the different types of conventional and unconventional monetary policies. It supplies content that is relevant to how these different policies affect the markets. Specifically, this paper provides information on the three different policies that are used under conventional monetary policies, unconventional monetary policies, how they are compared and when to use the unconventional monetary policies. These policies are in use in everyday life and affect everyone that is touched by the financial sector.

Conventional monetary and unconventional monetary policies are used by central banks to affect output, interest rates and money supply. Traditionally, there are three conventional monetary policies that are used by central banks and all three will be covered first. Then there are also three unconventional monetary policies that are used by central banks but are not quite as traditional since the most recent policy was used in 2008. The unconventional monetary policies that will be discussed are the ones that are the most used since they are effective. After you know what types of policies are out there and how they affect the economy, we will compare the conventional and unconventional monetary policies to see how they are used to the same end but in different economic conditions. The economic conditions of a country determine whether or not to use the conventional or unconventional monetary policies. Basically, you need to know whether to tighten or ease monetary policy, where your country is on the spectrum to know whether to use the conventional or unconventional monetary policies and what the different type of policies are and how they are used.