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Evaluating the Macroeconomic Effects of the ECB's Unconventional Monetary Policies

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  • SARAH MOUABBI
  • JEAN‐GUILLAUME SAHUC

Abstract

We quantify the macroeconomic effects of the European Central Bank's unconventional monetary policies using a dynamic stochastic general equilibrium model which includes a set of shadow interest rates. Extracted from the yield curve, these shadow rates provide unconstrained measures of the overall stance of monetary policy. Counterfactual analyses show that, without unconventional measures, the euro area would have suffered (i) a substantial loss of output since the Great Recession and (ii) a period of deflation from mid‐2015 to early 2017. Specifically, year‐on‐year inflation and GDP growth would have been on average about 0.61% and 1.09% below their actual levels over the period 2014Q1–17Q2, respectively.

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  • 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.
  • Handle: RePEc:wly:jmoncb:v:51:y:2019:i:4:p:831-858
    DOI: 10.1111/jmcb.12628
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    Cited by:

    1. Wu, Jing Cynthia & Zhang, Ji, 2019. "Global effective lower bound and unconventional monetary policy," Journal of International Economics, Elsevier, vol. 118(C), pages 200-216.
    2. Athanasios Orphanides, 2017. "The Fiscal-Monetary Policy Mix in the Euro Area: Challenges at the Zero Lower Bound," European Economy - Discussion Papers 2015 - 060, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Andrea Colabella, 2019. "Do the ECB’s monetary policies benefit emerging market economies? A GVAR analysis on the crisis and post-crisis period," Temi di discussione (Economic working papers) 1207, Bank of Italy, Economic Research and International Relations Area.
    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. Kortela, Tomi & Nelimarkka, Jaakko, 2020. "The effects of conventional and unconventional monetary policy : identification through the yield curve," Research Discussion Papers 3/2020, Bank of Finland.
    6. Hartmann, Philipp & Smets, Frank, 2018. "The first twenty years of the European Central Bank: monetary policy," Working Paper Series 2219, European Central Bank.
    7. 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.
    8. Stéphane Lhuissier & Benoit Mojon & Juan Rubio-Ramírez, 2020. "Does the liquidity trap exist?," BIS Working Papers 855, Bank for International Settlements.
    9. Christian Pfister & Jean-Guillaume Sahuc, 2020. "Unconventional monetary policies: A stock-taking exercise," Revue d'économie politique, Dalloz, vol. 130(2), pages 137-169.
    10. Lucia Esposito & Davide Fantino & Yeji Sung, 2020. "The impact of TLTRO2 on the Italian credit market: some econometric evidence," Temi di discussione (Economic working papers) 1264, Bank of Italy, Economic Research and International Relations Area.
    11. Etienne Vaccaro-Grange, 2019. "Quantitative Easing and the Term Premium as a Monetary Policy Instrument," Working Papers halshs-02359503, HAL.
    12. Grégory LEVIEUGE & Jean-Guillaume SAHUC, 2020. "Monetary policy transmission with downward interest rate rigidity," LEO Working Papers / DR LEO 2744, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    13. Rui Wang, 2019. "Unconventional Monetary Policy in Japan: Empirical Evidence from Estimated Shadow Rate DSGE Model," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 10(02), pages 1-29, June.
    14. Aßhoff, Sina & Belke, Ansgar & Osowski, Thomas, 2020. "Unconventional monetary policy and inflation expectations in the euro area," Ruhr Economic Papers 837, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    15. Eric R. Sims & Jing Cynthia Wu, 2019. "The Four Equation New Keynesian Model," NBER Working Papers 26067, National Bureau of Economic Research, Inc.
    16. Etienne Vaccaro-Grange, 2019. "Quantitative Easing and the Term Premium as a Monetary Policy Instrument," AMSE Working Papers 1932, Aix-Marseille School of Economics, France.
    17. Rostagno, Massimo & Altavilla, Carlo & Carboni, Giacomo & Lemke, Wolfgang & Motto, Roberto & Saint Guilhem, Arthur & Yiangou, Jonathan, 2019. "A tale of two decades: the ECB’s monetary policy at 20," Working Paper Series 2346, European Central Bank.
    18. Benjamin Garcia & Arsenios Skaperdas, 2017. "Inferring the Shadow Rate from Real Activity," Finance and Economics Discussion Series 2017-106, Board of Governors of the Federal Reserve System (U.S.).
    19. Eric R. Sims & Jing Cynthia Wu, 2019. "Evaluating Central Banks' Tool Kit: Past, Present, and Future," NBER Working Papers 26040, National Bureau of Economic Research, Inc.

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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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