It is in this context that an unprecedented expansion of the monetary base plays an essential role in our QQE. Fourth and lastly, I will discuss what I believe is a very critical transmission channel of unconventional monetary policy: the expectation channel.
This overlaps with the signaling effect associated with the “quantity” that I just mentioned.6 One possible problem is that the theoretical foundations seem not to be well established. Standard theories simply assume that rational expectations automatically hold, while they tend to be silent on exactly what it would take to change the way firms and households formulate their expectations.