The Effect of Conventional and Unconventional Euro Area Monetary Policy on Macroeconomic Variables

Posted: 15 Jan 2017

See all articles by Arne Halberstadt

Arne Halberstadt

Deutsche Bundesbank

Leo Krippner

Reserve Bank of New Zealand

Date Written: 2016

Abstract

We investigate the e ect of monetary policy on European macroeconomic variables using a small-scale vector autoregression (VAR) and the "Effective Monetary Stimulus" (EMS). The EMS is a monetary policy metric obtained from yield curve data that is designed to consistently reflect the overall stance of monetary policy across conventional and uncoventional monetary policy environments. Empirically, using the EMS in our VAR obtains plausible and stable structural relationships with prices and output developments across and within conventional and unconventional environments, and more so than short-maturity rates or alternative metrics, suggesting that it provides a useful practical monetary policy metric for policy makers. The VAR results show that European monetary policy shocks have been accommodative since 2007, although their e ect has become more uncertain compared to the conventional policy period.

Keywords: Monetary Policy, Zero Lower Bound, Dynamic Term Structure Model

JEL Classification: E43, E44, E52

Suggested Citation

Halberstadt, Arne and Krippner, Leo, The Effect of Conventional and Unconventional Euro Area Monetary Policy on Macroeconomic Variables (2016). Bundesbank Discussion Paper No. 49/2016. Available at SSRN: https://ssrn.com/abstract=2899670

Arne Halberstadt (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Leo Krippner

Reserve Bank of New Zealand ( email )

2 The Terrace
PO Box 2498
Wellington, 6140
New Zealand

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