Euro Area Monetary Policy in Uncharted Waters

Emil Stavrev, Cihák, Martin and Thomas Harjes

No 09/185, IMF Working Papers from International Monetary Fund

Abstract: We analyze the European Central Bank's (ECB's) response to the global financial crisis. Our results suggest that even during the crisis, the core part of ECB's monetary policy transmission-from policy rates to market rates-has continued to operate, but at a decreased efficiency. We also find some evidence that the ECB's non-standard measures, namely the lengthening of the maturity of monetary policy operations and the provision of funds at the fixed rate, reduced money market term spreads, facilitating the pass-through from policy to market rates. Furthermore, the results imply that the substantial increase in the ECB's balance sheet may have contributed to a reduction in government bond term spreads.

Keywords: Central bank policy; Deflation; Economic models; European Monetary System; European Union; Financial crisis; Inflation; Liquidity controls; Monetary policy; Monetary transmission mechanism (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
Date: 2009-08-31
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