Uncovering the heterogeneous effects of ECB unconventional monetary policies across euro area countries

Series: Working Papers. 1631.

Author: Pablo Burriel and Alessandro Galesi.

Topics: Exchange rates | Monetary policy | Central Balance Sheet Data Office | ECB, Eurosystem | Quantitative methods.

Published in: European Economic Review, Vol. 101, pp: 210-229

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Uncovering the heterogeneous effects of ECB unconventional monetary policies across euro area countries (1 MB)

Abstract

We assess the effects of the ECB’s recent unconventional monetary policy measures by estimating a global VAR that exploits panel variation among all euro area economies and explicitly takes into account cross-country interdependencies. Unconventional monetary policy measures have beneficial effects on activity, credit, inflation and equity prices, and lead to a depreciation of the exchange rate. Most euro area members benefit from these measures, but with a substantial degree of heterogeneity. Cross-country spillovers account for a sizable fraction of such dispersion, and substantially amplify effects. Countries with less fragile banking systems benefit the most from unconventional monetary policy measures. Compared to expansionary conventional monetary policies, unconventional measures are particularly effective in reducing firms’ financing costs and boosting credit.