The Dynamic Effects of the ECB’s Asset Purchases: A Survey-Based Identification

Abstract

This paper estimates the dynamic effects of the ECB's asset purchase programme (APP) using a proxy structural vector autoregression. We construct a novel proxy for structural APP shocks as unexpected changes in the size of additional purchases announced by the ECB. Unexpected changes are inferred from public expectations released in quantitative surveys just before monetary policy announcements. The results consistently show that innovations to APP have expansionary effects on both output and prices: an immediate increase in asset purchases of one percent of GDP leads to a maximum impact in industrial production and consumer prices by 0.15 percent and 0.06 percent, respectively. Overall, APP shocks account for less than a fifth of the long-run macroeconomic variability. Finally, our counterfactual analyses indicate that APP and its successive recalibrations were central in supporting inflation. For example, we find inflation would have fallen into negative territory without December 2015 and March 2016 APP recalibrations.

The ECB's asset purchase programme: Theory, effects, and risks

“…Compared to dynamic stochastic general equilibrium (DSGE) models, time-series models (including BVARs) tend to produce higher (lower) estimates. The same assessment applies to the comparison between Rostagno's results and the evidence offered by SVAR models; as noted again by Rostagno et al (2021), p. 44), Gambetti and Musso (2017) find a GDP increase of 0.02% by using quarterly data; Wieladek et al (2016) and Lhuissier and Nguyen (2021) find a GDP increase of 0.1% by using monthly data.…”

“…(2021), p. 44), Gambetti and Musso (2017) find a GDP increase of 0.02% by using quarterly data; Wieladek et al. (2016) and Lhuissier and Nguyen (2021) find a GDP increase of 0.1% by using monthly data.…”

U.S. and Euro Area Monetary and Fiscal Interactions During the Pandemic: A Structural Analysis

“…This result is similar to simulations from the euro area New Area-Wide model in which a fiscal stimulus of 1 percent of steady state GDP could raise inflation by 0.1 percentage point at peak (Coenen, Montes-Galdon andSmets, 2021, Pfeiffer et al, 2021). This effect is equivalent to an increase in asset purchases by the ECB of 3 to 6 percent of GDP (Rostagno and others, 2021;Lhuissier and Nguyen 2021), demonstrating the relatively stronger effect of fiscal policy at the ELB. In the outer years, since the temporary demand boost would fade away but the increase in productivity is more persistent, the output gap would be less positive, reducing inflationary pressure.…”