Effectiveness of Unconventional Monetary Policy in the Euro Area: An Assessment Based on a Literature Survey

The ECB has adopted a variety of unconventional monetary policy measures since the Global Financial Crisis. In this paper, we assess the effectiveness of unconventional monetary policy measures based on a review of the empirical literature and on theoretical considerations. Empirical assessments exhibit a high uncertainty since it is very difficult to identify the definite effects of unconventional monetary policy and historical evidence is scarce. Therefore, the estimated effects vary considerably across studies. Overall, the available evidence for the euro area suggests that unconventional measures had significant effects on financial market variables, e. g., they reduced long-term interest rates or stimulated asset prices. Unconventional monetary policy also seems to have stimulated economic activity (GDP and consumer prices) to some extent. The available evidence suggests that unconventional monetary policy had the largest effects at the height of the Global Financial Crisis and the sovereign debt crises on economic activity in the euro area. Afterwards, the effects on economic activity most likely have been rather low. Moreover, the risks associated with unconventional monetary policy measures are expected to increase while the effects on economic activity decrease the longer they are in place.

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