The impact of unconventional monetary policies on perceptions of extreme events at times of crisis

Irma Alonso Alvarez

Economic Bulletin, 2020, issue 4/2020, No 42

Abstract: The European Central Bank’s and the Federal Reserve’s announcements of unconventional monetary policies have contributed to significantly reducing market perceptions of the probability of extreme macro-financial events. This phenomenon has arisen in periods of intense market strain, such as the global financial crisis and the current COVID-19 crisis. These measures have served to mitigate the materialisation of extremely unfavourable events through the feedback loop between the financial sector and the real economy and to ensure adequate monetary policy transmission.

Keywords: unconventional monetary policy; tail risk; uncertainty; risk-neutral densities; extreme events. (search for similar items in EconPapers)
JEL-codes: E44 E58 G01 G10 G14 (search for similar items in EconPapers)
Date: 2020
Note: Analytical Articles
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