The European Central Bank's QE: A New Hope

32 Pages Posted: 13 Jul 2016

See all articles by Tomasz Wieladek

Tomasz Wieladek

Bank of England

Antonio I. Garcia Pascual

International Monetary Fund (IMF) - Western Hemisphere Department; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: June 16, 2016

Abstract

We examine the impact of the ECB’s QE on Euro Area real GDP and core CPI with a Bayesian VAR, estimated on monthly data from 2012M6 to 2016M4. We assess the total impact via a counter-factual exercise, country-by-country and through alternative transmission channels. QE announcement shocks are identified with four different identification schemes as in Weale and Wieladek (2016). We find that in absence of the first round of ECB QE, real GDP and core CPI would have been 1.3% and 0.9% lower, respectively. The effect is roughly 2/3 times smaller than in the UK/US. Impulse response analysis suggests that the policy is transmitted via the portfolio rebalancing, the signalling, credit easing and exchange rate channels. Spanish real GDP benefited the most and Italian the least.

Keywords: ECB unconventional monetary policy, transmission mechanism

JEL Classification: E500, E510, E520

Suggested Citation

Wieladek, Tomasz and Garcia Pascual, Antonio I., The European Central Bank's QE: A New Hope (June 16, 2016). CESifo Working Paper Series No. 5946, Available at SSRN: https://ssrn.com/abstract=2809098

Tomasz Wieladek

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Antonio I. Garcia Pascual (Contact Author)

International Monetary Fund (IMF) - Western Hemisphere Department ( email )

700 19th Street NW
Washington, DC 20431
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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