This paper estimates an open-economy dynamic stochastic general equilibrium model with Bayesian techniques to analyse the macroeconomic effects of the European Central Bank's (ECB's) quantitative easing (QE) programme. Using data on government debt stocks and yields across maturities, we identify the parameter governing portfolio adjustment in the private sector. Shock decompositions suggest a positive contribution of ECB QE to annual euro area output growth and inflation in 2015-16 of up to 0.3 and 0.6 percentage points (pp) in the linearised version of the model. Allowing for an occasionally binding zerobound constraint by using piecewise linear solution techniques raises the positive impact to up to 0.7 and 0.8 pp. RésuméNous estimons, par des techniques bayésiennes, un modèle d'équilibre général dynamique et stochastique en économie ouverte afin d'analyser les effets macroéconomiques du programme d'assouplissement quantitatif de la Banque centrale européenne (BCE). À partir des données portant sur l'encours des titres d'État et les taux de rendement pour la gamme des échéances, nous évaluons le paramètre qui détermine les ajustements de portefeuilles dans le secteur privé. Les décompositions de chocs effectuées montrent qu'en zone euro, les mesures d'assouplissement quantitatif de la BCE auraient entraîné, en 2015-2016, des effets positifs sur la croissance annuelle de la production et sur l'inflation à hauteur de 0,3 et 0,6 point de pourcentage dans la version linéarisée du modèle. Lorsque nous permettons que la contrainte de la borne du zéro soit occasionnellement active au moyen de techniques de linéarisation, l'incidence favorable se chiffre respectivement à 0,7 et 0,8 point de pourcentage. Sujets : Modèles économiques; Taux d'intérêt; Transmission de la politique monétaire Codes JEL : E44, E52, E53, F41 Non-technical SummaryIn early 2015 the European Central Bank (ECB) joined the group of central banks that have implemented large-scale asset purchase programmes as unconventional policy measures. The ECB's quantitative easing (QE) programme, announced in January 2015, foresaw buying €60 billion of assets a month from March 2015 to September 2016, which in sum corresponds to circa 10% of annualised euro area (EA) gross domestic product (GDP). It has been continuously revised in both size and duration since then. This paper analyses the macroeconomic effects of the ECB's QE programme using a tworegion dynamic stochastic general equilibrium (DSGE) model for the EA and the rest of the world, estimated with Bayesian techniques. The estimation of the model is undertaken in an environment where the zero lower bound may be binding and to solve such models requires extending previous algorithms. QE is introduced into the model by adding a central bank balance sheet and distinguishing between short-term and long-term government debt. We use a formulation of a private-sector portfolio that allows for non-neutral effects of central bank purchase programmes due to imperfect substitutability between assets of different...
Bank of Canada staff working papers provide a forum for staff to publish work-in-progress research independently from the Bank's Governing Council. This research may support or challenge prevailing policy orthodoxy. Therefore, the views expressed in this paper are solely those of the authors and may differ from official Bank of Canada views. No responsibility for them should be attributed to the Bank.
Marco Ratto (European Commission, Joint Research Centre) Werner Roeger (European Commission, DG ECFIN) Lukas Vogel (European Commission, DG ECFIN)The trade balances of the Euro Area (EA) and of the US have improved markedly after the Global Financial Crisis. This paper quantifies the drivers of EA and US economic fluctuations and external adjustment, using an estimated (1999-2017) three-region (US, EA, rest of world) DSGE model with trade in manufactured goods and in commodities. In the model, commodity prices reflect global demand and supply conditions. The paper highlights the key contribution of the post-crisis collapse in commodity prices for the EA and US trade balance reversal. Aggregate demand shocks originating in Emerging Markets too had a significant impact on EA and US trade balances. The broader lesson of this paper is that Emerging Markets and commodity shocks are major drivers of advanced countries' trade balances and terms of trade.JEL Codes: F2,F3,F4
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