Unconventional monetary policy, fiscal side effects and euro area (im)balances

Michele Piffer, Michael Hachula, Malte Rieth

Research output: Contribution to journalArticlepeer-review

22 Citations (Scopus)
283 Downloads (Pure)

Abstract

We study the macroeconomic effects of unconventional monetary policy in the euro area using structural vector autoregressions, identified with external instruments. The instruments are based on the common unexpected variation in euro area sovereign yields for different maturities on policy announcement days. We first show that expansionary monetary surprises are effective at lowering public and private interest rates and increasing economic activity, consumer prices, and inflation expectations. We then document that the shocks lead to a rise in primary public expenditures and a widening of internal trade balances.
Original languageEnglish
Pages (from-to)202-231
JournalJournal of the European Economic Association
Volume18
Issue number1
Early online date7 Jan 2019
DOIs
Publication statusPublished - 28 Feb 2020

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