DP8348 Macroeconomic Effects of Unconventional Monetary Policy in the Euro Area

Author(s): Gert Peersman
Publication Date: April 2011
Keyword(s): SVARs, unconventional monetary policy
JEL(s): C32, E30, E44, E51, E52
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8348

I estimate the dynamic effects of respectively traditional interest rate innovations and unconventional monetary policy actions on the Euro area economy. The results show that the Eurosystem can stimulate the economy beyond the policy rate by increasing the size of its balance sheet. The ultimate consequences on output and consumer prices are however more sluggish compared to interest rate innovations. Furthermore, the transmission mechanism via financial institutions - very likely the risk-taking channel - turns out to be different.