Disentangling the effects of multidimensional monetary policy on inflation and inflation expectations in the euro area

Arbeitspapier

The European Central Bank (ECB) has adopted a mixture of conventional and unconventional tools in order to achieve its mandate of price stability in the current low-inflation, low-interest-rate scenario. This paper contributes to the existing literature by providing a taxonomy of the ECB's policy toolkit and by evaluating its implications on price stability and the anchoring of inflation expectations. I carry out my analysis based on a high-frequency identification and the estimation of a large Bayesian Vector Autoregression. I find evidence of re-anchored expectations as response to quantitative easing and forward guidance, i.e. forecasters revise their long-run expectations upwards. Consequently, inflation increases, which stresses the crucial role of expectations for the transmission of monetary policy.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper ; No. 2020/18

Classification and Topics

• Classification: Wirtschaft ; Monetary Policy ; Large Data Sets: Modeling and Analysis ; Bayesian Analysis: General ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Price Level; Inflation; Deflation
• Subject: Inflation Expectations ; Monetary Policy ; Large BVAR ; High-frequency identification

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Martínez-Hernández, Catalina
• Event: Veröffentlichung
• (who): Freie Universität Berlin, School of Business & Economics
• (where): Berlin
• (when): 2020

Further information

• DOI: doi:10.17169/refubium-28493
• Handle: http://hdl.handle.net/10419/225639
• URN: urn:nbn:de:kobv:188-refubium-28745-1
• Last update: 10.03.2025, 11:43 AM CET