Assessing the Efficacy, Efficiency and Potential Side Effects of the ECB's Monetary Policy Instruments Since 2014

68 Pages Posted: 22 Sep 2021 Last revised: 18 Jan 2022

See all articles by Carlo Altavilla

Carlo Altavilla

European Central Bank (ECB)

Wolfgang Lemke

European Central Bank

Tobias Linzert

European Central Bank (ECB)

Jens Tapking

European Central Bank (ECB)

Julian von Landesberger

European Central Bank (ECB)

Date Written: September, 2021

Abstract

This paper summarises the work done by Eurosystem staff in the context of the Strategy Review Seminar on Monetary Policy Instruments. More specifically, it focuses on the efficacy, efficiency and potential side effects of the key monetary policy instruments employed by the European Central Bank since 2014. The following main findings emerge from the analysis. First, instruments have been effective in easing financing conditions and supporting economic growth, employment and inflation. Second, considering the effective lower bound on policy rates, a combination of instruments is generally more efficient than relying on a single tool. Third, side effects have been generally contained so far, but they are found to vary over time and need to be closely monitored on an ongoing basis. Fourth, the monetary policy toolkit needs to remain innovative, diversified, and flexible, i.e. reviewed regularly to ensure that it remains fit for purpose against the backdrop of evolving financial and macroeconomic conditions.

Keywords: monetary policy instruments, standard and non-standard measures

JEL Classification: E52, E58, E43, E44, E47

Suggested Citation

Altavilla, Carlo and Lemke, Wolfgang and Linzert, Tobias and Tapking, Jens and von Landesberger, Julian, Assessing the Efficacy, Efficiency and Potential Side Effects of the ECB's Monetary Policy Instruments Since 2014 (September, 2021). ECB Occasional Paper No. 2021/278, Available at SSRN: https://ssrn.com/abstract=3928300

Carlo Altavilla (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Wolfgang Lemke

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Tobias Linzert

European Central Bank (ECB)

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Jens Tapking

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Julian Von Landesberger

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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