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Uncovering the heterogeneous effects of ECB unconventional monetary policies across euro area countries

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  • Burriel, Pablo
  • Galesi, Alessandro

Abstract

We assess the effects of recent ECB’s unconventional monetary policy (UMP) measures by estimating a global VAR that exploits panel variation amongst all euro area economies and explicitly takes into account cross-country interdependencies. Most euro area members benefit from these measures but with substantial heterogeneity, whose extent has been evolving over time and peaked with the sovereign debt crisis. Cross-country spillovers account for a sizable fraction of such dispersion, and substantially amplify effects. Countries with more fragile banking systems benefit the least from unconventional monetary policy measures, and especially so in terms of output gains. Importantly, this heterogeneity implies that the effects on real activity of the whole currency union get substantially dampened. In this respect, we also document that UMP shocks imply significantly smaller and less persistent effects than those arising from conventional interest rate surprises.

Suggested Citation

  • Burriel, Pablo & Galesi, Alessandro, 2018. "Uncovering the heterogeneous effects of ECB unconventional monetary policies across euro area countries," European Economic Review, Elsevier, vol. 101(C), pages 210-229.
  • Handle: RePEc:eee:eecrev:v:101:y:2018:i:c:p:210-229
    DOI: 10.1016/j.euroecorev.2017.10.007
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    More about this item

    Keywords

    Unconventional monetary policy; Euro area; GVAR; Heterogeneity; Spillovers;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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