The impact of ECB Unconventional Monetary Policies

Abstract

This dissertation is aimed at addressing two questions about unconventional monetary policies in the Eurozone. First, what policies are being tried and their effectiveness. In doing so, this study surveys the literature on the effectiveness of UMP in responding to financial crisis and boosting economic activities. Second, focusing on the unconventional policies adopted by the ECB, we assess their effects on the main macroeconomic aggregates and financial variables by using observations of Euro Area countries. In doing so, we highlight the differences in the effects among countries included in the sample. Furthermore, compared to other dataset, we use data up to M12 2019, thus also the very recent QE announcement by President Draghi delivered in September 2019 is also taken into consideration. A VAR model is used to analyse the common monetary policies in the Eurozone since the VAR allows for a better identification of the real effects of UMP shocks. Results confirm the heterogeneity of the effects of UMPs on inflation, industrial production and producer price index among different countries of the Eurozone in the period 2010-2019. In the last paper, we analyse the impact of Draghi’s famous announcement made in July 2012 on sovereign bond spreads through the Generalized Synthetic Control Method. We analyse the period from Q2 2009 to Q4 2015 with quarterly data. Results show that the announcement of UMPs in the Eurozone contributed to the reduction of sovereign bond spreads for the nine Eurozone countries included in the sample. [edited by Author]