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The impact of unconventional monetary policy on the Italian economy during the sovereign debt crisis

Author

Listed:
  • Marco Casiraghi

    () (Bank of Italy)

  • Eugenio Gaiotti

    () (Bank of Italy)

  • Lisa Rodano

    () (Bank of Italy)

  • Alessandro Secchi

    () (Bank of Italy)

Abstract

We assess the impact on the Italian economy of the main unconventional monetary policies adopted by the ECB in 2011-2012 (SMP, 3-year LTROs and OMTs) by following a two-step approach. We evaluate their effects on money market interest rates, government bond yields and credit availability and then map them onto macroeconomic implications using the Bank of Italy quarterly model of the Italian economy. We find that the SMP and the OMTs have been effective in counteracting increases in government bond yields and that the LTROs have had a beneficial impact on credit supply and money market conditions. From a macroeconomic perspective, we find that the unconventional policies have had a large positive effect on the Italian economy, mainly through the credit channel, with a cumulative impact on GDP growth of 2.7 percentage points over the period 2012-2013. To conclude, while the policies did not prevent the Italian economy from falling into recession, they did avoid a more intense credit crunch and a larger output fall than those actually observed.

Suggested Citation

  • Marco Casiraghi & Eugenio Gaiotti & Lisa Rodano & Alessandro Secchi, 2013. "The impact of unconventional monetary policy on the Italian economy during the sovereign debt crisis," Questioni di Economia e Finanza (Occasional Papers) 203, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:opques:qef_203_13
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    References listed on IDEAS

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    Cited by:

    1. Wedow, Michael & Koetter, Michael & Podlich, Natalia, 2017. "Inside asset purchase programs: the effects of unconventional policy on banking competition," Working Paper Series 2017, European Central Bank.
    2. Lewis, Vivien & Roth, Markus, 2017. "The financial market effects of the ECB's asset purchase programs," Discussion Papers 23/2017, Deutsche Bundesbank.
    3. Gibson, Heather D. & Hall, Stephen G. & Tavlas, George S., 2016. "The effectiveness of the ECB's asset purchase programs of 2009 to 2012," Journal of Macroeconomics, Elsevier, vol. 47(PA), pages 45-57.
    4. Alessio Ciarlone & Andrea Colabella, 2016. "Spillovers of the ECB's non-standard monetary policy into CESEE economies," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 34(81), pages 175-190, November.
    5. Paolo Del Giovane & Andrea Nobili & Federico Maria Signoretti, 2013. "Supply tightening or lack of demand? An analysis of credit developments during the Lehman Brothers and the sovereign debt crises," Temi di discussione (Economic working papers) 942, Bank of Italy, Economic Research and International Relations Area.
    6. Francesco Bripi & David Loschiavo & Davide Revelli, 2017. "Services trade and credit frictions: evidence from matched bank-firm data," Temi di discussione (Economic working papers) 1110, Bank of Italy, Economic Research and International Relations Area.
    7. Guido Bulligan & Fabio Busetti & Michele Caivano & Pietro Cova & Davide Fantino & Alberto Locarno & Lisa Rodano, 2017. "The Bank of Italy econometric model: an update of the main equations and model elasticities," Temi di discussione (Economic working papers) 1130, Bank of Italy, Economic Research and International Relations Area.
    8. Margherita Bottero & Simone Lenzu & Filippo Mezzanotti, 2014. "Sovereign Debt Exposure and the Bank Lending Channel: Impact on Credit Supply and the Real Economy," Working Paper 220976, Harvard University OpenScholar.
    9. Marco Casiraghi & Eugenio Gaiotti & Lisa Rodano & Alessandro Secchi, 2016. "A “reverse Robin Hood”? The distributional implications of non-standard monetary policy for Italian households," Temi di discussione (Economic working papers) 1077, Bank of Italy, Economic Research and International Relations Area.
    10. Yevgeniya Korniyenko & Elena Loukoianova, 2015. "The Impact of Unconventional Monetary Policy Measures by the Systemic Four on Global Liquidity and Monetary Conditions," IMF Working Papers 15/287, International Monetary Fund.
    11. García-Posada, Miguel & Marchetti, Marcos, 2016. "The bank lending channel of unconventional monetary policy: The impact of the VLTROs on credit supply in Spain," Economic Modelling, Elsevier, vol. 58(C), pages 427-441.
    12. Fabio Panetta, 2016. "Central banking in the XXI century: never say never," BAFFI CAREFIN Working Papers 1626, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.

    More about this item

    Keywords

    monetary policy; unconventional monetary measures;

    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
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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