Evaluating the effectiveness of unconventional monetary policy tools in addressing financial crises )Review article(

Abstract

This article aims to provide a literature review, presented in an analytical style, of the most important economic and financial literature that has discussed the topic of unconventional monetary policy tools. It begins with the foundational conceptual and theoretical principles, then proceeds to a detailed analysis of the nature and characteristics of these tools, tracing the channels through which their monetary impact is transmitted to economic activity. Finally, it assesses the effectiveness of their application in addressing financial and economic crises, particularly the 2008 financial crisis and the 2020 COVID-19 pandemic. This is achieved by examining and monitoring some of the academic and field debates that have discussed the extent of success of these tools, as well as the potential negative side effects if they are used excessively. This article adopts a descriptive-analytical approach. The article concludes that these tools have been successful in addressing severe liquidity shortages, reducing risk margins, and thus preventing the collapse of the financial system. However, it is unable to maintain its true stimulating effect, and therefore cannot be relied upon excessively to establish sustainable development behaviours.