Macroeconomic Effects of Unconventional Monetary Policy in the Euro Area

35 Pages Posted: 30 Nov 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: October 27, 2011

Abstract

I find that the Euro-system can stimulate the economy beyond the policy rate by increasing the size of its balance sheet or the monetary base. The transmission mechanism turns out to be different compared to traditional interest rate innovations: (i) 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 (ii) interest rate spreads charged by banks decline persistently after a rise in the monetary base, whereas the spreads increase significantly after a fall in the policy rate (iii) 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 Euro-systems balance sheet.

Keywords: Unconventional monetary policy, SVARs

JEL Classification: C32, E30, E44, E51, E52

Suggested Citation

Peersman, Gert, Macroeconomic Effects of Unconventional Monetary Policy in the Euro Area (October 27, 2011). ECB Working Paper No. 1397, Available at SSRN: https://ssrn.com/abstract=1950039 or http://dx.doi.org/10.2139/ssrn.1950039

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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