The conduct of monetary policy in the Eurozone before and after the financial crisis

Monetary policy models: lessons from the Eurozone crisis

“…Logically, the starting point must be a survey of empirical evidence on the objectives and instruments of the monetary policy relevant to the monetary transmission mechanisms. The analyses in this respect are numerous 4 , and, not surprisingly, a large body of studies focus on the ECB response to the crisis and the peculiarities of the monetary transmission mechanisms in the Eurozone (see, for instance, Angeloni et al, 2002;Drakos and Kouretas, 2015;ECB European Central Bank, 2010;Grandi, 2019;Weber et al, 2009). These studies reveal several salient features instrumental to our purpose: (i) They prove the existence of a continuous and stable inflation targeting by the ECB; (ii) they indicate the unresponsive credit growth for the sharp money supply increases and interest rate descents administered by the ECB; (iii) as several scholars conclude (see for instance, Fiedler and Gern, 2019;Giannone et al, 2019, and the references therein) this breakdown with respect to the established theoretical results is the consequence of significant changes in the monetary transmission mechanisms, or at least in the way they must be modeled; (iv) directly related to the above, the coexistence during the recent crisis of deflation, GDP contraction, and expansive monetary and fiscal policies for the Eurozone economy seems to respond to debt-deflation mechanisms, a crucial issue pointed out by several authors (see the monographs by Baimbridge and Whyman, 2015;Cardinale et al, 2017;Chang et al, 2019); (v) finally, these empirical studies show the increasing relevance of financial elements in the effectiveness of the monetary transmission mechanism and the vital role played by the bank lending channel.…”

Inflation uncertainty, disagreement and monetary policy: Evidence from the ECB Survey of Professional Forecasters

“…The emergence of inflation uncertainty may reflect concerns about further rising inflation due to expansive monetary policy or fears of deflation as a result of a prolonged recession period (Drakos and Kouretas, 2015;Scharnagl and Stapf, 2015). Several theoretical arguments suggest that macroeconomic uncertainty has negative welfare effects (Fernández-Villaverde et al, 2011;Bloom et al, 2014).…”

An econometric evaluation of the management of large-scale transport infrastructure in Spain during the great recession: Lessons for infrastructure bubbles

“…Development, 2015). Parallel to this, the European Union has put forward the Junker Plan, which plans to devote €220,000 m to transport, energy and telecommunications infrastructure (European Commission, 2014), made possible by the ease with which inflation has been contained within the Eurozone (Dracos and Kouretas, 2015).…”