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Effectiveness of Unconventional Monetary Policy in the Euro Area: An Assessment Based on a Literature Survey

Author

Listed:
  • Salomon Fiedler

    (Institut für Weltwirtschaft, Kiellinie 66, 24105 Kiel)

  • Isabel Hanisch

    (University of Notre Dame, Department of Economics, 3060 Jenkins Nanovic Hall, Notre Dame, IN 46556, USA)

  • Dr. Nils Jannsen Hanisch

    (Institut für Weltwirtschaft, Kiellinie 66, 24105 Kiel)

  • Prof. Dr. Maik Wolters

    (University of Jena, Carl-Zeiß-Straße 3, 07743 Jena und Institut für Weltwirtschaft, Kiellinie 66, 24105 Kiel)

Abstract

The ECB has adopted a variety of unconventional monetary policy measures since the Global Financial Crisis. In this paper, we assess the effectiveness of unconventional monetary policy measures based on a review of the empirical literature and on theoretical considerations. Empirical assessments exhibit a high uncertainty since it is very difficult to identify the definite effects of unconventional monetary policy and historical evidence is scarce. Therefore, the estimated effects vary considerably across studies. Overall, the available evidence for the euro area suggests that unconventional measures had significant effects on financial market variables, e. g., they reduced long-term interest rates or stimulated asset prices. Unconventional monetary policy also seems to have stimulated economic activity (GDP and consumer prices) to some extent. The available evidence suggests that unconventional monetary policy had the largest effects at the height of the Global Financial Crisis and the sovereign debt crises on economic activity in the euro area. Afterwards, the effects on economic activity most likely have been rather low. Moreover, the risks associated with unconventional monetary policy measures are expected to increase while the effects on economic activity decrease the longer they are in place.

Suggested Citation

  • Salomon Fiedler & Isabel Hanisch & Dr. Nils Jannsen Hanisch & Prof. Dr. Maik Wolters, 2017. "Effectiveness of Unconventional Monetary Policy in the Euro Area: An Assessment Based on a Literature Survey," Credit and Capital Markets, Credit and Capital Markets, vol. 50(4), pages 455-488.
  • Handle: RePEc:kuk:journl:v:50:y:2017:i:4:p:455-488
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    JEL classification:

    • 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
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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