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The ‘visible hand’ of the ECB’s quantitative easing

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  • Valiante, Diego

Abstract

In the midst of the market turbulence of recent years, policy rates have reached the zero lower bound, with central banks aggressively deploying their balance sheet with an array of ‘unconventional’ monetary policies to ensure the transmission of monetary policy impulses in disrupted financial markets, ultimately to set the conditions for economic recovery. Since March 9th, the European Central Bank (ECB) has also joined the club of central banks deploying the most feared monetary policy tool in its armoury. Unsterilised outright asset purchases (so-called ‘quantitative easing’, or QE) aim to re-establish control over the transmission of monetary policy impulse via policy rates by improving conditions for unsecured interbank market activity. This paper examines three dimensions of quantitative easing: i) the rationale behind the ECB’s new monetary policy stance, ii) the operational challenges of QE and iii) preliminary evidence on the effects of QE on markets.

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  • Valiante, Diego, 2015. "The ‘visible hand’ of the ECB’s quantitative easing," CEPS Papers 10611, Centre for European Policy Studies.
    • Handle: RePEc:eps:cepswp:10611
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    References listed on IDEAS

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    1. Claudio Borio, 2011. "Central banking post-crisis: What compass for uncharted waters?," BIS Working Papers 353, Bank for International Settlements.
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    3. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 215-287.
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    6. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 215-287.
    7. Diego Valiante, 2015. "Banking union in a single currency area: evidence on financial fragmentation," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 7(3), pages 251-274, August.
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    Cited by:

    1. Giovanna Bua & Peter G. Dunne, 2019. "The Portfolio Rebalancing Effects of the ECB's Asset Purchase Programme," International Journal of Central Banking, International Journal of Central Banking, vol. 15(5), pages 1-46, December.
    2. Romanos Priftis & Lukas Vogel, 2017. "The macroeconomic effects of the ECB’s evolving QE programme: a model-based analysis," Open Economies Review, Springer, vol. 28(5), pages 823-845, November.
    3. Romanos Priftis & Lukas Vogel, 2016. "The Portfolio Balance Mechanism and QE in the Euro Area," Manchester School, University of Manchester, vol. 84(S1), pages 84-105, September.
    4. Meijers, Huub & Muysken, Joan, 2016. "The impact of quantitative easing in the Netherlands: A stock-flow consistent approach," MERIT Working Papers 2016-067, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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