Unconventional Monetary Policy of the ECB during the Financial Crisis: An Assessment and New Evidence

45 Pages Posted: 15 Jun 2013

See all articles by Christiaan Pattipeilohy

Christiaan Pattipeilohy

De Nederlandsche Bank - Monetary and Economic Policy Department; Vrije Universiteit Amsterdam, School of Business and Economics

Jan Willem van den End

De Nederlandsche Bank

Mostafa Tabbae

De Nederlandsche Bank

Jon Frost

Bank for International Settlements (BIS) - Financial Stability Board (FSB); De Nederlandsche Bank

Jakob de Haan

University of Groningen - Faculty of Economics and Business; De Nederlandsche Bank; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: May 28, 2013

Abstract

We first sketch how central banks have used unconventional monetary policy measures by using three indicators based on the composition of the balance sheet of eleven central banks. Our analysis suggests that although the ECB’s balance sheet has increased dramatically during the crisis, the non-standard monetary policy measures had only a moderate impact on the composition of the ECB’s balance sheet compared to other central banks, such as the Fed and the Bank of England. Next, we take stock of research analysing the effects of unconventional monetary policy of the ECB after the onset of the crisis. A crucial question is to what extent these measures have been able to affect interest rates, thereby restoring the monetary policy transmission process and supporting the central bank objectives. Finally, we offer new evidence on the effectiveness of the ECB’s unconventional monetary policy measures, i.e. extended liquidity provision (LTRO) and the Securities Market Programme (SMP). Our results suggest that the LTRO interventions in general had a favorable (short-term) effect on government bond yields. Changes in the SMP only had a visible downward effect on bond yields in Summer 2011, when the program was reactivated for Italy and Spain, but this effect dissipated within a few weeks.

Keywords: unconventional monetary policy, non-standard monetary policy, central bank balance sheet, European Central Bank

JEL Classification: E40, E50, E58, E60

Suggested Citation

Pattipeilohy, Christiaan and van den End, Jan Willem and Tabbae, Mostafa and Frost, Jon and de Haan, Jakob, Unconventional Monetary Policy of the ECB during the Financial Crisis: An Assessment and New Evidence (May 28, 2013). De Nederlandsche Bank Working Paper No. 381. Available at SSRN: https://ssrn.com/abstract=2278838 or http://dx.doi.org/10.2139/ssrn.2278838

Christiaan Pattipeilohy (Contact Author)

De Nederlandsche Bank - Monetary and Economic Policy Department ( email )

Westeinde 1
1017 ZN Amsterdam
Netherlands

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Jan Willem van den End

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Mostafa Tabbae

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Jon Frost

Bank for International Settlements (BIS) - Financial Stability Board (FSB) ( email )

Basel
Switzerland

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Jakob de Haan

University of Groningen - Faculty of Economics and Business ( email )

PO Box 800
Groningen, 9700 AV
Netherlands
+31 0 50 3633706 (Fax)

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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