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Unconventional monetary policy in the Euro Area: Shadow rate and light effets

Author

Listed:
  • Christophe Boucher

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Catherine Lubochinsky
  • Salima Ouerk

Abstract

We assess transmission mechanisms and the macroeconomic impact of unconventional monetary policy (UMP) in the Euro Area. We estimate a FAVAR model and use a shadow rate to measure the stance of the monetary policy. The ECB's UMP measures adopted at the zero lower bound (ZLB) have sustained the real economy. For instance, in 2016, without UMP, investment would have been lower by 9%, consumption lower by 2% and the unemployment rate higher by 0.9%. However, the impact of unconventional monetary shocks is weaker and less persistent than those emanating from conventional monetary policy. Furthermore, the difference in the transmission of monetary policies between countries of the Euro Area was more pronounced during the period 2009-2016. This suggests that the ZLB has decreased the efficiency of monetary policy and accentuated the heterogeneity of the Euro Area.

Suggested Citation

  • Christophe Boucher & Catherine Lubochinsky & Salima Ouerk, 2020. "Unconventional monetary policy in the Euro Area: Shadow rate and light effets," Post-Print hal-03130956, HAL.
    • Handle: RePEc:hal:journl:hal-03130956
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    Cited by:

    1. Christophe Blot & Fabien Labondance, 2021. "Beyond the Interest Rate Pass-through: Monetary Policy and Banks Interest Rates during the Effective Lower Bound," SciencePo Working papers Main hal-04221606, HAL.
    2. Rémi Odry & Roman Mestre, 2021. "Monetary Policy and Business Cycle Synchronization in Europe," Working Papers hal-04159759, HAL.
    3. Sofya Kolesnik & Elizaveta Dobronravova, 2022. "Modelling the Effects of Unconventional Monetary Policy in a Heterogeneous Monetary Union," Russian Journal of Money and Finance, Bank of Russia, vol. 81(1), pages 3-22, March.
    4. Donato Masciandaro, 2023. "How Elastic and Predictable Money Should Be: Flexible Monetary Policy Rules from the Great Moderation to the New Normal Times (1993-2023)," BAFFI CAREFIN Working Papers 23196, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    5. Shodipe Oladimeji T. & Shobande Olatunji Abdul, 2021. "Monetary Policy Dynamics in the United States," Open Economics, De Gruyter, vol. 4(1), pages 14-30, January.
    6. Glocker, Christian & Piribauer, Philipp, 2021. "Digitalization, retail trade and monetary policy," Journal of International Money and Finance, Elsevier, vol. 112(C).
    7. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki & Inagaki, Yugo & Morgan, Peter J., 2021. "Analyzing the factors influencing the demand and supply of solar modules in Japan – Does financing matter," International Review of Economics & Finance, Elsevier, vol. 74(C), pages 1-12.

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