The Impact of Unconventional Monetary Policy on the Italian Economy During the Sovereign Debt Crisis

42 Pages Posted: 7 Mar 2014

See all articles by Marco Casiraghi

Marco Casiraghi

Bank of Italy; International Monetary Fund (IMF) - International Capital Markets Department

Eugenio Gaiotti

Bank of Italy

Maria Lisa Rodano

Bank of Italy

Alessandro Secchi

Bank of Italy

Date Written: September 27, 2013

Abstract

We assess the impact on the Italian economy of the main unconventional monetary policies adopted by the ECB in 2011-2012 (SMP, 3-year LTROs and OMTs) by following a two-step approach. We evaluate their effects on money market interest rates, government bond yields and credit availability and then map them onto macroeconomic implications using the Bank of Italy quarterly model of the Italian economy. We find that the SMP and the OMTs have been effective in counteracting increases in government bond yields and that the LTROs have had a beneficial impact on credit supply and money market conditions. From a macroeconomic perspective, we find that the unconventional policies have had a large positive effect on the Italian economy, mainly through the credit channel, with a cumulative impact on GDP growth of 2.7 percentage points over the period 2012-2013. To conclude, while the policies did not prevent the Italian economy from falling into recession, they did avoid a more intense credit crunch and a larger output fall than those actually observed.

Keywords: monetary policy, unconventional monetary measures

JEL Classification: E52, E58, E44

Suggested Citation

Casiraghi, Marco and Casiraghi, Marco and Gaiotti, Eugenio and Rodano, Maria Lisa and Secchi, Alessandro, The Impact of Unconventional Monetary Policy on the Italian Economy During the Sovereign Debt Crisis (September 27, 2013). Bank of Italy Occasional Paper No. 203, Available at SSRN: https://ssrn.com/abstract=2405451 or http://dx.doi.org/10.2139/ssrn.2405451

Marco Casiraghi

International Monetary Fund (IMF) - International Capital Markets Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Eugenio Gaiotti

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy
+39 06 4092 2718 (Phone)
+39 06 4792 3723 (Fax)

Maria Lisa Rodano

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alessandro Secchi (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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