Evaluating the Macroeconomic Effects of the ECB's Unconventional Monetary Policies

Mouabbi, Sarah; Sahuc, Jean‐Guillaume

doi:10.1111/jmcb.12628

Cited by 59 publications

(11 citation statements)

References 49 publications

(55 reference statements)

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“…In computing our impulse responses, we follow Pellegrino (2017Pellegrino ( , 2021, Caggiano et al (2017), andAmendola et al (2020) and allow the elements composing the interaction term in the nonlinear VAR-in our case, uncertainty and real activity-to endogenously 6 The DSGE model we work with does not explicitly feature unconventional policy interventions (namely, quantitative easing). Following Wu and Zhang (2019), Mouabbi and Sahuc (2019), and Sims and Wu (2020), we interpret a negative interest rate in presence of the zero lower bound as a close substitute for unconventional policies. 7 Larsen (2021) conducts a study on Norwegian data and finds financial uncertainty to be a driver of the Norwegian business cycle.…”

Section: Related Literaturementioning

confidence: 99%

Uncertainty and Monetary Policy During the Great Recession

Pellegrino

Castelnuovo

Caggiano

2022

Int Economic Review

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We employ a nonlinear VAR framework and a state-of-the-art identi…cation strategy to document the large response of real activity to a …nancial uncertainty shock during and in the aftermath of the great recession. We replicate this evidence with an estimated DSGE framework featuring a concept of uncertainty comparable to that in our VAR. We then use the estimated framework to quantify the output loss due to the large uncertainty shock that materialized in 2008Q3. We …nd such a shock to be able to explain about 60% of the output loss in the 2008-2014 period. The same estimated model unveils the role successfully played by the Federal Reserve in limiting the output loss that would otherwise have occurred had monetary policy been conducted as in normal times. Finally, we show that the rule estimated during the great recession is able to deliver an economic outcome closer to the ‡exible price one than the rule describing the Federal Reserve's conduct in normal times.

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Section: Related Literaturementioning

confidence: 99%

Uncertainty and Monetary Policy During the Great Recession

Pellegrino

Castelnuovo

Caggiano

2022

Int Economic Review

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“…They are presented in Table 3. Source: (Blattner & Joyce 2016;hohberger et al, 2018;Gambetti & Musso, 2017;Mouabbi & Sahus, 2019).…”

Section: Figure 2 Unconventional Instruments Of the Ecb's Monetary Policymentioning

confidence: 99%

Unconventional monetary policy of the European Central Bank: A brief recapitulation

Skibińska-Fabrowska

2019

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<p>The financial and economic crisis that has hit many economies in recent years has significantly increased the activity of central banks. After using the standard instruments of conducting monetary policy, in view of the obstruction of monetary impulse transmission channels, they reached for non-standard instruments. Among them, asset purchase programs played a signifciant role. The European Central Bank (ECB) launched the largest asset purchase programme (APP) of this type in 2014 and expired in December 2018. The aim of the undertaken activities was to improve the situation on the financial market and stimulate economic growth. The article reviews the literature and results of research on the effects of the program and indicates the possibility of using the ECB’s experience in conducting monetary policy by the National Bank of Poland.</p>

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“…Multiple studies have documented that since the introduction of unconventional monetary policies, traditional instruments have been rendered useless for the assessment of monetary policyfor example Borio and Zabai (2016), Coenen et al (2017), Glick and Leduc (2018), Mouabbi and Sahuc (2019) or Pažický (2018Pažický ( , 2019. The apparent lack of sensitivity of longer-term interest rates to changes in short-term rates has already been 3 A renewed QE package of the ECB released on 12 September 2019 consisted of: (1) an openended QE program for public and private assets that will run at a pace of 20bn EUR per month until "shortly before" key interest rates start rising; (2) a 10bp cut in the deposit rate along with strengthened forward guidance; (3) two-tier system for reserve remuneration; (4) easier TLTRO-III terms for the banks.…”

Section: Introductionmentioning

confidence: 99%

Oil price shock in the US and the euro area – evidence from the shadow rate and the term premium

Pažický

2021

Review of Economic Perspectives

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The aim of this article is to investigate the consequences of oil price changes for the economy of the US and the euro area. Oil price transmission channel is assessed using Granger causalities and structural vector autoregressive (VAR) specifications (applying the Cholesky factorization and the restrictions following the method of Blanchard and Quah). The conventional oil price transmission channel is extended by a shadow policy rate and term premium, as the importance of both indicators has been growing rapidly in recent years. The results confirm that the oil price shock is not negligible in the aftermath of the Global Financial Crisis and in the subsequent period of monetary policy normalization. The findings are confirmed by the outcomes of the Bayesian VAR specification with sign restrictions. The consequences of changes in oil prices have significantly grown since the introduction of unconventional monetary instruments. The magnitude of the response of industrial production, price level and shadow interest rate to the oil price shock is strongest in the period corresponding to the unconventional monetary policy. In many cases, however, the reaction is short-lived. The conventional instrument (policy rate) in the euro area has still not been sufficient to stabilize the economy in the recent period of monetary policy normalization in the US.

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Evaluating the Macroeconomic Effects of the ECB's Unconventional Monetary Policies

Cited by 59 publications

References 49 publications

Uncertainty and Monetary Policy During the Great Recession

Uncertainty and Monetary Policy During the Great Recession

Unconventional monetary policy of the European Central Bank: A brief recapitulation

Oil price shock in the US and the euro area – evidence from the shadow rate and the term premium

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