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Exit Strategies and Their Impact on the Euro Area – A Model Based View

Author

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  • Ansgar Belke

Abstract

This paper comments on the pros and cons of exit strategies. The focus is on the impact on the Euro area economy of the exit from unconventional monetary policies (UMP) by the Fed, which, appears to be the first central bank to lay out an exiting path. In this context, it discusses the issue of policy coordination between central banks in the light of the substantial potential spillover effects via capital flows and exchange rate adjustments of unconventional monetary policies. The risks of a premature versus a delayed exit are assessed. In particular, the paper looks at the risk associated to spillover effects from UMP exit and the different shapes of exit paths. It also analyse exit strategies in a wider context and the associated financial stability risks, with a specific focus on the role of uncertainty. The paper presents estimates of the impact of the Fed’s exit from UMP in 2014 on the Euro area economy using new and innovative global IMF models. Finally, specific policy options to minimize exit risks are discussed and compared.

Suggested Citation

  • Ansgar Belke, 2014. "Exit Strategies and Their Impact on the Euro Area – A Model Based View," ROME Working Papers 201401, ROME Network.
    • Handle: RePEc:rmn:wpaper:201401
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    Cited by:

    1. Stanislav Hába, 2019. "Způsoby ukončení kvantitativního uvolňování na příkladech Japonska, Spojeného království a Spojených států amerických [Methods of Exiting Quantitative Easing on the Examples of Japan, the UK and the USA]," Politická ekonomie, Prague University of Economics and Business, vol. 2019(1), pages 48-64.

    More about this item

    Keywords

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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management

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