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The impact of ECB policies on Euro area investment

Listed author(s):
  • Christophe Blot

    (Observatoire français des conjonctures économiques)

  • Jérôme Creel

    (Observatoire français des conjonctures économiques)

  • Paul Hubert

    (Observatoire français des conjonctures économiques)

  • Fabien Labondance

    (Observatoire français des conjonctures économiques)

We analyze the reasons for which the very accommodative policy led by the ECB has not triggered a rebound of investment. After examining the evolutions of investment in the euro area, we observe a large heterogeneity both across sectors and countries. Consequently, it is questionable that the ECB’s monetary policy can increase investment in the whole area. Therefore, we study the extent to which monetary policy impacts investment. We use a counterfactual analysis and compute the level of investment had the ECB’s decisions been different. We observe the importance of the ECB in support to investment. Indeed, the investment in the euro area would have sunk without accommodative – first conventional, then unconventional – monetary policy. Finally, we lay the emphasis on the role of credit demand as one of the main determinants of investment since the 2008 crisis, which has depended among others on the impact of deleveraging and fiscal consolidation.

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File URL: http://spire.sciencespo.fr/hdl:/2441/6m0bv06f219euqrh92910rst87/resources/june-2016.pdf
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Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/6m0bv06f219euqrh92910rst87.

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Date of creation: Jun 2016
Handle: RePEc:spo:wpmain:info:hdl:2441/6m0bv06f219euqrh92910rst87
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  1. Jing Cynthia Wu & Fan Dora Xia, 2016. "Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(2-3), pages 253-291, 03.
  2. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, 05.
  3. Christophe Blot & Jérôme Creel & Paul Hubert & Fabien Labondance, 2015. "The QE experience: worth a try?," Sciences Po publications info:hdl:2441/4qb2og10r48, Sciences Po.
  4. Matteo Barigozzi & Antonio M. Conti & Matteo Luciani, 2014. "Do Euro Area Countries Respond Asymmetrically to the Common Monetary Policy?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(5), pages 693-714, October.
  5. Hashem Pesaran, M. & Smith, Ron P., 2016. "Counterfactual analysis in macroeconometrics: An empirical investigation into the effects of quantitative easing," Research in Economics, Elsevier, vol. 70(2), pages 262-280.
  6. Adrian, T. & Shin, H S., 2008. "Liquidity and financial contagion," Financial Stability Review, Banque de France, issue 11, pages 1-7, February.
  7. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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