Download or read book Financial Crises, Unconventional Monetary Policy Exit Strategies, and Agents' Expectations written by Andrew T. Foerster and published by . This book was released on 2014 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper considers a model with financial frictions and studies the role of expectations and unconventional monetary policy response to financial crises. During a financial crisis, the financial sector has reduced ability to provide credit to productive firms, and the central bank may help lessen the magnitude of the downturn by using unconventional monetary policy to inject liquidity into credit markets. The model allows parameters to change according to a Markov process, which gives agents in the economy expectations about the probability of the central bank intervening in response to a crisis, as well as expectations about the central bank's exit strategy post-crisis. Using this Markov regime switching.