The Non-Standard Monetary Policy Measures of the ECB: Motivations, Effectiveness and Risks

Abstract

This paper examines the challenges faced by the European Central Bank since the outbreak of the global financial crisis. From 2008 to 2014, the need to preserve the correct functioning of the monetary policy transmission mechanism and ensure the supply of credit to the private sector stretched the limits of conventional monetary policy. In 2015, the risk of deflation led the ECB to start a large scale asset purchase programme. The analysis is largely based on a review of the many studies that Banca d’Italia staff has produced on the factors that have brought inflation to unprecedented low levels in 2014 and on the effects of the asset purchase programme. Zusammenfassung Dieser Beitrag untersucht die Herausforderungen, vor denen die Europäische Zentralbank seit dem Ausbruch der globalen Finanzkrise steht. Von 2008 bis 2014 hat die Notwendigkeit, das ordnungsgemäße Funktionieren des geldpolitischen Transmissionsmechanismus zu wahren und die Kreditversorgung des privaten Sektors sicherzustellen, die Grenzen der konventionellen Geldpolitik überschritten. Im Jahr 2015 führte das Deflationsrisiko dazu, dass die EZB ein groß angelegtes Anleihenkaufprogramm aufnahm. Die vorliegende Analyse basiert im Wesentlichen auf einer Überprüfung der zahlreichen Studien, welche die Mitarbeiter der Banca d‘Italia zu den Faktoren erstellt haben. Diese Faktoren haben einerseits die Inflation 2014 auf ein beispiellos niedriges Niveau gebracht und andererseits Auswirkungen auf das Programm zum Ankauf von Vermögenswerten zur Folge gehabt. JEL Classification: E31, E43, E52

Does the Liquidity Trap Exist?

“…Boeckx, Dossche, and Peersman (2014) found some effects the non-conventional policies of the ECB on activity, although their sample at the ELB is shorter than ours. The counterfactual simulations reported in Figure 12 of Neri and Siviero (2019) are consistent with our estimates and the ones of several recent papers which they review. The ECB's unconventional policy has stimulated economic activity even at the ELB.…”

“…A comprehensive review of the expanding literature that assesses the effects of non-conventional monetary policy goes much beyond the ambition of this paper. But the interested reader can find a comparison of the estimated effects of nonconventional monetary policies, as available in 2016, in Table 7 of Borio and Zabai (2018), and a review of no less than 150 papers on the topic, most of which were published in the last five years, in Neri and Siviero (2019).…”

A Tale of Two Decades: The Ecb's Monetary Policy at 20

“…Finally, we contribute to the expanding literature on the effects of unconventional policies. Not surprisingly, given the innovative features of many of these policies and the limited stretch of time over which researchers have been able to observe their effects, empirical results on their efficacy span a broad spectrum between considerable impacts (Swanson (2017), Eberly et al (2019), Sims and Wu (2019), and, on the euro area, Szczerbowicz (2015), Podlich, Schnabel and Tischer (2017), Mouabbi and Sahuc (2019), Gibson et al (2016), and Neri and Siviero (2019)), to heterogeneous impacts (Burriel and Galesi (2018) and Deutsche Bundesbank (2016)), to rather moderate impacts (Pattipeilohy et al (2013), Greenlaw et al (2018), and Belke and Gros (2019)). Despite relying on a time-series methodology which, in backing out the macroeconomic propagation of the ECB's measures, does not give too much credit to any direct expectation channel of monetary policy, we find very sizeable effects.…”

The European Central Bank's Monetary Policy during Its First 20 Years

“…In the early stages of 68. For a discussion of the motivations, effectiveness, and risks of the ECB's nonstandard measures, also see Neri and Siviero (2019).…”