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Unconventional Monetary Policy of the ECB during the Financial Crisis: An Assessment and New Evidence

  • Jakob de Haan
  • Willem van den End
  • Jon Frost
  • Christiaan Pattipeilohy
  • Mostafa Tabbae

We first sketch how central banks have used unconventional monetary policy measures by using three indicators based on the composition of the balance sheet of eleven central banks. Our analysis suggests that although the ECB's balance sheet has increased dramatically during the crisis, the non-standard monetary policy measures had only a moderate impact on the composition of the ECB's balance sheet compared to other central banks, such as the Fed and the Bank of England. Next, we take stock of research analysing the effects of unconventional monetary policy of the ECB after the onset of the crisis. A crucial question is to what extent these measures have been able to affect interest rates, thereby restoring the monetary policy transmission process and supporting the central bank objectives. Finally, we offer new evidence on the effectiveness of the ECB's unconventional monetary policy measures, i.e. extended liquidity provision (LTRO) and the Securities Market Programme (SMP). Our results suggest that the LTRO interventions in general had a favorable (short-term) effect on government bond yields. Changes in the SMP only had a visible downward effect on bond yields in Summer 2011, when the program was reactivated for Italy and Spain, but this effect dissipated within a few weeks.

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  • Niels C. Thygesen & Robert N. McCauley & Guonan Ma & William R. White & Jakob de Haan & Willem van den End & Jon Frost & Christiaan Pattipeilohy & Mostafa Tabbae & Ernest Gnan & Morten Balling & Paul , 2013. "50 Years of Money and Finance: Lessons and Challenges," SUERF 50th Anniversary Volume - 50 Years of Money and Finance: Lessons and Challenges, SUERF - The European Money and Finance Forum, number 1 edited by Morten Balling & Ernest Gnan.
  • This item is provided by SUERF - The European Money and Finance Forum in its series SUERF 50th Anniversary Volume Chapters with number 1-4.
    Handle: RePEc:erf:erfftc:1-4
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    1. G. Peersman, 2011. "Macroeconomic Effects of Unconventional Monetary Policy in the Euro Area," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/734, Ghent University, Faculty of Economics and Business Administration.
    2. Ghysels, Eric & Idier, Julien & Manganelli, Simone & Vergote, Olivier, 2013. "A high frequency assessment of the ECB Securities Markets Programme," CEPR Discussion Papers 9778, C.E.P.R. Discussion Papers.
    3. Vasco Cúrdia & Michael Woodford, 2010. "The central-bank balance sheet as an instrument of monetary policy," Staff Reports 463, Federal Reserve Bank of New York.
    4. Paolo Angelini & Andrea Nobili & Maria Cristina Picillo, 2009. "The interbank market after August 2007: what has changed, and why?," Temi di discussione (Economic working papers) 731, Bank of Italy, Economic Research and International Relations Area.
    5. Stephan Fahr & Roberto Motto & Massimo Rostagno & Frank Smets & Oreste Tristani, 2013. "A monetary policy strategy in good and bad times: lessons from the recent past," Economic Policy, CEPR;CES;MSH, vol. 28(74), pages 243-288, 04.
    6. Emil Stavrev & Thomas Harjes & Martin Cihák, 2009. "Euro Area Monetary Policy in Uncharted Waters," IMF Working Papers 09/185, International Monetary Fund.
    7. repec:cup:cbooks:9781107635920 is not listed on IDEAS
    8. Jan Willem van den End, 2010. "Liquidity Stress-Tester: Do Basel III and Unconventional Monetary Policy Work?," DNB Working Papers 269, Netherlands Central Bank, Research Department.
    9. Leonardo Gambacorta & Boris Hofmann & Gert Peersman, 2012. "The Effectiveness of Unconventional Monetary Policy at the Zero Lower Bound: A Cross-Country Analysis," BIS Working Papers 384, Bank for International Settlements.
    10. Vladimir Klyuev & Phil De Imus & Krishna Srinivasan, 2009. "Unconventional Choices for Unconventional Times Credit and Quantitative Easing in Advanced Economies," IMF Staff Position Notes 2009/27, International Monetary Fund.
    11. Robin Greenwood & Dimitri Vayanos, 2008. "Bond supply and excess bond returns," LSE Research Online Documents on Economics 24425, London School of Economics and Political Science, LSE Library.
    12. Yacine Aït-Sahalia & Jochen Andritzky & Andreas Jobst & Sylwia Nowak & Natalia Tamirisa, 2010. "Market Response to Policy Initiatives during the Global Financial Crisis," NBER Working Papers 15809, National Bureau of Economic Research, Inc.
    13. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.
    14. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," NBER Working Papers 13932, National Bureau of Economic Research, Inc.
    15. Beirne, John & Dalitz, Lars & Ejsing, Jacob & Grothe, Magdalena & Manganelli, Simone & Monar, Fernando & Sahel, Benjamin & Sušec, Matjaž & Tapking, Jens & Vong, Tana, 2011. "The impact of the Eurosystem's covered bond purchase programme on the primary and secondary markets," Occasional Paper Series 122, European Central Bank.
    16. Gert Peersman, 2012. "Effectiveness of Unconventional Monetary Policy at the Zero Lower Bound," 2012 Meeting Papers 400, Society for Economic Dynamics.
    17. Heiko Hesse & Nathaniel Frank, 2009. "The Effectiveness of Central Bank Interventions During the First Phase of the Subprime Crisis," IMF Working Papers 09/206, International Monetary Fund.
    18. Kilponen , Juha & Laakkonen, Helinä & Vilmunen, Jouko, 2012. "Sovereign risk, European crisis resolution policies and bond yields," Research Discussion Papers 22/2012, Bank of Finland.
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