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Country-level effects of the ECB’s expanded asset purchase programme

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  • Andrejs Zlobins

    (Monetary Policy Department, Bank of Latvia, Riga, Latvia)

Abstract

This paper evaluates the macroeconomic effects of the European Central Bank’s (ECB) Expanded asset purchase programme (APP) on Latvia and other euro area jurisdictions and investigates the cross- border transmission mechanism. To that end, we employ two different vector autoregressive (VAR) models, namely a bilateral structural VAR with block exogeneity (BSVAR-BE) and a multi- country mixed cross-section global VAR with stochastic volatility (MCS-BGVAR-SV). We find that the APP had a limited and weakly significant impact on Latvia’s output while the effect on inflation has been robust due to depreciation of the euro. Regarding other jurisdictions, results suggest that the ECB’s asset purchases had a larger impact on industrial production in the countries where it drove down long-term interest rates the most via portfolio rebalancing channel. Despite that, our evidence suggests that the APP was mainly transmitted to inflation via exchange rate depreciation rather than through aggregate demand-driven shifts in the Phillips curve.

Suggested Citation

  • Andrejs Zlobins, 2020. "Country-level effects of the ECB’s expanded asset purchase programme," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 20(2), pages 187-217.
    • Handle: RePEc:bic:journl:v:20:y:2020:i:2:p:187-217
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    Cited by:

    1. Andrejs Zlobins, 2023. "Is There a Portfolio Rebalancing Channel of QE in Latvia?," Working Papers 2023/05, Latvijas Banka.
    2. Gan‐Ochir Doojav & Davaasukh Damdinjav, 2023. "The macroeconomic effects of unconventional monetary policies in a commodity‐exporting economy: Evidence from Mongolia," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4627-4654, October.
    3. Andrejs Zlobins, 2021. "On the Time-varying Effects of the ECB's Asset Purchases," Working Papers 2021/02, Latvijas Banka.

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    More about this item

    Keywords

    Asset purchase programme; quantitative easing; euro area; GVAR; SVAR; Bayesian estimation;
    All these keywords.

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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