Unconventional monetary policy and inflation expectations in the euro area

Arbeitspapier

With the ECB's policy rate having reached the zero lower bound, traditional monetary policy tools became ineffective and the ECB was forced to adopt a set of unconventional monetary policy (UMP) measures. This paper examines the effects of the ECB's UMP on inflation expectations in the Euro area as inflation expectations play a key role for achieving the inflation target of below, but close to 2%. Quantifying the impact of UMP is not straightforward, as standard empirical tools such as VAR cannot be applied. Hence, we use the Qual VAR approach pioneered by Dueker (2005) to overcome this problem. We indeed find that UMP leads to a rise in inflation expectations in the short run but that this effect appears to evaporate in the medium term. Our results put some doubt on the common claim that UMP has consistently contributed to a re-anchoring and a stabilisation of inflation expectations at the zero lower bound. Nevertheless, they indicate a rise in medium-term real GDP growth triggered by UMP.

Object Details

• ISBN: 978-3-86788-970-4
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Ruhr Economic Papers ; No. 837

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Price Level; Inflation; Deflation ; Financial Markets and the Macroeconomy ; Monetary Policy
• Subject: Bayesian VAR ; Qual VAR ; inflation expectations ; euro area ; quantitative easing ; unconventional monetary policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Aßhoff, Sina ; Belke, Ansgar ; Osowski, Thomas
• Event: Veröffentlichung
• (who): RWI - Leibniz-Institut für Wirtschaftsforschung
• (where): Essen
• (when): 2020

Further information

• DOI: doi:10.4419/86788970
• Handle: http://hdl.handle.net/10419/213076
• Last update: 10.03.2025, 11:43 AM CET