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Αssessing the impact of unconventional monetary policy on long-term interest rates in the euro area with the use of a macro-finance model

Author

Listed:
  • Sophocles Brissimis

    (Department of Economics, University of Piraeus, and Bank of Greece)

  • Evangelia Georgiou

    (Economic Analysis and Research Department, Bank of Greece)

Abstract

This paper draws on the macro-finance model developed in Brissimis and Georgiou (2022) which exploits the expectations hypothesis with time variation in the term premium, to evaluate the effects of unconventional monetary policy on long-term interest rates in the euro area. The empirical specification of the model provides an overall excellent fit to the data of the euro area. To assess the effects of quantitative easing, we employ stock measures of this variable derived from the liabilities side of the Eurosystem balance sheet. We provide estimates for both short-run and long-run effects, the latter resulting from sustained increases in central bank liabilities. Our empirical results suggest that stronger effects on long-term rates arise from broader measures of quantitative easing, although these effects seem to have weakened during the negative interest rate period.

Suggested Citation

  • Sophocles Brissimis & Evangelia Georgiou, 2025. "Αssessing the impact of unconventional monetary policy on long-term interest rates in the euro area with the use of a macro-finance model," Working Papers 348, Bank of Greece.
    • Handle: RePEc:bog:wpaper:348
    DOI: 10.52903/wp2025348
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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • 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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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