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The macroeconomic effects of the ECB’s evolving QE programme: a model-based analysis

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  • Romanos Priftis

    (European Commission)

  • Lukas Vogel

    (European Commission)

Abstract

This paper analyses the macroeconomic effects of the European Central Bank’s asset purchase programme in its initial version and subsequent modifications under the lens of a dynamic macroeconomic model, which includes assets of different types and maturity, and explicitly introduces asset purchases of long-term bonds (held by euro area and non-euro area residents) by the central bank. With imperfect substitutability between asset classes, portfolio rebalancing in the context of quantitative easing (QE) affects bond yields, stock prices, the exchange rate and the private sector’s saving decision. QE as announced in January 2015 generates 0.4% effective euro depreciation and raises real GDP in the euro area by 0.2% and prices by 0.3% by 2017 in the model. The subsequent extensions of the QE programme (extension in time and increase in volume) more than double the medium-term output and inflation effects according to the simulations.

Suggested Citation

  • Romanos Priftis & Lukas Vogel, 2017. "The macroeconomic effects of the ECB’s evolving QE programme: a model-based analysis," Open Economies Review, Springer, vol. 28(5), pages 823-845, November.
    • Handle: RePEc:kap:openec:v:28:y:2017:i:5:d:10.1007_s11079-017-9460-1
    DOI: 10.1007/s11079-017-9460-1
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    Cited by:

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    2. Merino Troncoso, Carlos, 2021. "Macroeconomic effects of EU Competition Policy," MPRA Paper 105168, University Library of Munich, Germany.
    3. Kabaca, Serdar & Maas, Renske & Mavromatis, Kostas & Priftis, Romanos, 2023. "Optimal quantitative easing in a monetary union," European Economic Review, Elsevier, vol. 152(C).
    4. A. Bartocci & L. Burlon & A. Notarpietro & M. Pisani, 2021. "Macroeconomic Effects of Non‐Standard Monetary Policy Measures in the Euro Area: The Role of Corporate Bond Purchases," Manchester School, University of Manchester, vol. 89(S1), pages 97-130, September.
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    6. Lyu, Juyi & Le, Vo Phuong Mai & Meenagh, David & Minford, Patrick, 2023. "UK monetary policy in an estimated DSGE model with financial frictions," Journal of International Money and Finance, Elsevier, vol. 130(C).
    7. Gerhard Rösl & Franz Seitz & Karl-Heinz Tödter, 2019. "The Cost of Overcoming the Zero Lower-Bound: A Welfare Analysis," Economies, MDPI, vol. 7(3), pages 1-18, July.
    8. 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.
    9. Tarek Chebbi, 2021. "The response of precious metal futures markets to unconventional monetary surprises in the presence of uncertainty," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1897-1916, April.
    10. Merino Troncoso, Carlos, 2021. "Macroeconomic effects of EU Competition Policy," MPRA Paper 116160, University Library of Munich, Germany.
    11. Angela Capolongo & Daniel Gros, 2020. "The ECB is running out of policy space: can fiscal policy help?," Economics and Business Letters, Oviedo University Press, vol. 9(3), pages 216-220.
    12. Jost, Thomas & Seitz, Franz, 2021. "Designing a European Monetary Fund: What role for the IMF?," IMFS Working Paper Series 151, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).

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    More about this item

    Keywords

    Quantitative easing; Portfolio adjustment; Asset prices; Real sector;
    All these keywords.

    JEL classification:

    • 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
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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