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The impact of conventional and unconventional monetary policy on expectations and sentiment

Author

Listed:
  • Emilios Galariotis

    (Audencia Business School)

  • Panagiota Makrichoriti

    (AUEB - Athens University of Economics and Business)

  • Spyros Spyrou

    (AUEB - Athens University of Economics and Business)

Abstract

This paper offers evidence on the effect of ECB's conventional and unconventional monetary policy on economic expectations in Euro-area countries during the US and EU crisis. We employ a range of research methodologies in a sample of nine Eurozone countries and combine expectations/sentiment indicators with a set of macroeconomic and financial variables. We find that ECB's conventional monetary policy (and Fed's monetary policy stance) has a positive and significant effect on economic expectations for Core Eurozone countries and a weak effect on Peripheral Eurozone countries. ECB's unconventional policy measures, however, have a negative short term effect on Core countries' economic expectations. This result is robust to different methodologies (PVAR, QVAR, FAVAR) and different datasets. Overall, our findings highlight the importance of monetary policy in the determination of economic expectations.

Suggested Citation

  • Emilios Galariotis & Panagiota Makrichoriti & Spyros Spyrou, 2018. "The impact of conventional and unconventional monetary policy on expectations and sentiment," Post-Print hal-01596107, HAL.
    • Handle: RePEc:hal:journl:hal-01596107
    DOI: 10.1016/j.jbankfin.2017.08.014
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    More about this item

    Keywords

    Economic expectations; Sentiment; Unconventional monetary policy;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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