Macroeconomic Effects of Unconventional Monetary Policy in the Euro Area

30 Pages Posted: 28 Sep 2011

See all articles by Gert Peersman

Gert Peersman

Ghent University - Department of Financial Economics

Multiple version iconThere are 3 versions of this paper

Date Written: September 27, 2011

Abstract

I find that the Eurosystem can stimulate the economy beyond the policy rate by increasing the size of its balance sheet or the monetary base, that is so-called quantitative easing. The transmission mechanism turns out to be different compared to traditional interest rate innovations: whilst the effects on economic activity and consumer prices reach a peak after about one year for an interest rate innovation, this is more than six months later for a shift in the monetary base that is orthogonal to the policy rate interest rate spreads charged by banks decline persistently after quantitative easing policies, whereas the spreads increase significantly after a fall in the policy rate there is no significant short-run liquidity effect after an interest rate innovation, that is additional bank loans are generated by a greater credit multiplier. In contrast, the multiplier declines considerably after an expansion of the Eurosystem’s balance sheet.

Keywords: unconventional monetary policy, SVARs

JEL Classification: C320, E300, E440, E510, E520

Suggested Citation

Peersman, Gert, Macroeconomic Effects of Unconventional Monetary Policy in the Euro Area (September 27, 2011). Available at SSRN: https://ssrn.com/abstract=1934167 or http://dx.doi.org/10.2139/ssrn.1934167

Gert Peersman (Contact Author)

Ghent University - Department of Financial Economics ( email )

W. Wilsonplein 5D
Ghent, 9000
Belgium
+3292643514 (Phone)

HOME PAGE: www.feb.ugent.be/fineco/gert.html

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