See Eggertsson and Woodford (2003), and Nakov (2008). 11 See Evans (2010). 12 Note also that in the case of nominal GDP level targeting, an additional challenge arises due to the unobservability of potential GDP and measurement errors in real GDP. 13 See, for instance, Kryvtsov, Shukayev and Ueberfeldt (2008).
Asset purchases boost economic activity and raise inflation through several channels: they reduce yields on public sector securities, with effects on other segments of the financial market and on credit conditions for households and firms; they increase the value of assets and hence private sector spending capacity; they cause a depreciation of the currency, which impacts on imported inflation and exports; and they improve inflation expectations and public confidence.