Why narrative information matters: Evidence from the asset purchase program of the ECB

Frederic Opitz

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: In this paper, I evaluate the effects of public sector purchase program announcement shocks in the Euro area estimating a Bayesian VAR with sign-restrictions augmented by narrative information taken from event studies. Using monthly data, I find that the shocks persistently increase inflation and output. The exchange rate, market volatility, borrowing costs, and systemic risk fall while the quantity of household credit and economic and consumer sentiment rises. Most importantly, I find that the additional narrative information substantially reduces the uncertainty around these effects, shedding new light on the effectiveness and the pass-through of unconventional monetary policy

Keywords: Unconventional monetary policy; APP; Narrative sign-restrictions (search for similar items in EconPapers)
JEL-codes: E50 E51 E52 E58 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2020-03
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:20/994

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