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Title:Macroeconomic effects of unconventional monetary policy in the Euro area PDF Logo
Authors:Peersman, Gert
Issue Date:2011
Series/Report no.:CESifo working paper: Monetary Policy and International Finance 3589
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: (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 quantitative easing policies, 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 Eurosystem's balance sheet.
Subjects:unconventional monetary policy
SVARs
JEL:C32
E30
E44
E51
E52
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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