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The ECB’s Asset Purchase Programme: A Model-Based Evaluation

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  • Jean-Guillaume Sahuc

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper uses a dynamic stochastic general equilibrium model with financial frictions to quantify the effects of the European Central Bank’s recent asset purchase programme. Our results suggest that the macroeconomic effects of purchases are potentially important when the programme is associated with forward guidance on the interest rate. The signalling that the future monetary policy stance will remain accommodative is the prominent transmission channel.
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Suggested Citation

  • Jean-Guillaume Sahuc, 2016. "The ECB’s Asset Purchase Programme: A Model-Based Evaluation," Post-Print hal-01612701, HAL.
    • Handle: RePEc:hal:journl:hal-01612701
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    1. Stefania D’Amico & William English & David López‐Salido & Edward Nelson, 2012. "The Federal Reserve's Large‐scale Asset Purchase Programmes: Rationale and Effects," Economic Journal, Royal Economic Society, vol. 122(564), pages 415-446, November.
    2. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 215-287.
    3. Simon Gilchrist & Benoit Mojon, 2018. "Credit Risk in the Euro Area," Economic Journal, Royal Economic Society, vol. 128(608), pages 118-158, February.
    4. Marco Del Negro & Marc P. Giannoni & Christina Patterson, 2023. "The Forward Guidance Puzzle," Journal of Political Economy Macroeconomics, University of Chicago Press, vol. 1(1), pages 43-79.
    5. Michael D. Bauer & Glenn D. Rudebusch, 2014. "The Signaling Channel for Federal Reserve Bond Purchases," International Journal of Central Banking, International Journal of Central Banking, vol. 10(3), pages 233-289, September.
    6. Mark Gertler & Peter Karadi, 2013. "QE 1 vs. 2 vs. 3. . . : A Framework for Analyzing Large-Scale Asset Purchases as a Monetary Policy Tool," International Journal of Central Banking, International Journal of Central Banking, vol. 9(1), pages 5-53, January.
    7. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 215-287.
    8. C. Cahn & J. Matheron & J-G. Sahuc, 2014. "Assessing the macroeconomic effects of LTROS," Working papers 528, Banque de France.
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    Cited by:

    1. Athanasios Orphanides, 2020. "The fiscal–monetary policy mix in the euro area: challenges at the zero lower bound," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 35(103), pages 461-517.
    2. Fabo, Brian & Jančoková, Martina & Kempf, Elisabeth & Pástor, Ľuboš, 2021. "Fifty shades of QE: Comparing findings of central bankers and academics," Journal of Monetary Economics, Elsevier, vol. 120(C), pages 1-20.
    3. Gerke, Rafael & Giesen, Sebastian & Kienzler, Daniel, 2018. "Uncertainty about QE effects when an interest rate peg is anticipated," Discussion Papers 12/2018, Deutsche Bundesbank.
    4. Hohberger, Stefan & Priftis, Romanos & Vogel, Lukas, 2019. "The macroeconomic effects of quantitative easing in the euro area: Evidence from an estimated DSGE model," Journal of Economic Dynamics and Control, Elsevier, vol. 108(C).
    5. Sarah Mouabbi & Jean‐Guillaume Sahuc, 2019. "Evaluating the Macroeconomic Effects of the ECB's Unconventional Monetary Policies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(4), pages 831-858, June.
    6. Christian Pfister & Jean-Guillaume Sahuc, 2020. "Unconventional monetary policies: A stock-taking exercise," Revue d'économie politique, Dalloz, vol. 130(2), pages 137-169.
    7. Hollmayr, Josef & Kühl, Michael, 2019. "Monetary–fiscal interaction and quantitative easing," Economics Letters, Elsevier, vol. 174(C), pages 200-207.
    8. Darracq Pariès, Matthieu & Papadopoulou, Niki X., 2020. "On the credit and exchange rate channels of central bank asset purchases in a monetary union," Economic Modelling, Elsevier, vol. 91(C), pages 502-533.
    9. Mandler, Martin & Scharnagl, Michael, 2020. "Estimating the effects of the Eurosystem's asset purchase programme at the country level," Discussion Papers 29/2020, Deutsche Bundesbank.
    10. Benigno Pierpaolo & Canofari Paolo & Di Bartolomeo Giovanni & Messori Marcello, 2020. "The ECB’s Asset Purchase Programme: Theory, effects, and risks," wp.comunite 00147, Department of Communication, University of Teramo.
    11. Michael T. Kiley, 2018. "Quantitative Easing and the ‘New Normal’ in Monetary Policy," Manchester School, University of Manchester, vol. 86(S1), pages 21-49, September.
    12. Gerke, Rafael & Giesen, Sebastian & Scheer, Alexander, 2020. "The power of forward guidance in a quantitative TANK model," Economics Letters, Elsevier, vol. 186(C).
    13. M. Marx & B. Nguyen & J.-G. Sahuc, 2016. "Monetary policy measures in the euro area and their effects since 2014," Rue de la Banque, Banque de France, issue 32, october..
    14. Maciej Stefański, 2021. "Macroeconomic Effects of Quantitative Easing Using Mid-sized Bayesian Vector Autoregressions," KAE Working Papers 2021-068, Warsaw School of Economics, Collegium of Economic Analysis.
    15. Fernando Avalos & Emmanuel C Mamatzakis, 2018. "Euro area unconventional monetary policy and bank resilience," BIS Working Papers 754, Bank for International Settlements.
    16. Stephanie Titzck & Jan Willem van den End, 2021. "The impact of size, composition and duration of the central bank balance sheet on inflation expectations and market prices," The European Journal of Finance, Taylor & Francis Journals, vol. 27(12), pages 1186-1209, August.
    17. Matthieu Darracq-Pariès & Niki Papadopoulou, 2020. "Balance Sheet Policies in a Large Currency Union: A Primer on ECB Non-Standard Measures since 2014," Revue d'économie politique, Dalloz, vol. 130(2), pages 171-230.
    18. Yih-Bey Lin & Fu-Min Chang & Yu-Hin Leung & Jui-Feng Lin & Nicholas Lee, 2018. "Do European Central Bank Asset Purchase Programmes Matter for the Euro-area Stock Markets and Brent Crude Market?," International Journal of Energy Economics and Policy, Econjournals, vol. 8(3), pages 115-120.
    19. Rostagno, Massimo & Altavilla, Carlo & Carboni, Giacomo & Lemke, Wolfgang & Motto, Roberto & Saint Guilhem, Arthur, 2021. "Combining negative rates, forward guidance and asset purchases: identification and impacts of the ECB’s unconventional policies," Working Paper Series 2564, European Central Bank.

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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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