EconPapers    
Economics at your fingertips  
 

On the effectiveness of the European Central Bank’s conventional and unconventional policies under uncertainty

Niko Hauzenberger, Michael Pfarrhofer and Anna Stelzer

Journal of Economic Behavior & Organization, 2021, vol. 191, issue C, 822-845

Abstract: In this paper, we investigate the effectiveness of conventional and unconventional monetary policy measures by the European Central Bank (ECB) conditional on the prevailing level of uncertainty. To obtain exogenous variation in central bank policy, we rely on high-frequency surprises in financial market data for the euro area (EA) around policy announcement dates. We trace the dynamic effects of shocks to the short-term policy rate, forward guidance and quantitative easing on several key macroeconomic and financial quantities alongside survey-based measures of expectations. For this purpose, we propose a Bayesian smooth-transition vector autoregression (ST-VAR), using a measure of economic policy uncertainty as signal variable. Our results suggest that transmission channels are impaired when uncertainty is elevated. While conventional monetary policy and forward guidance can be less effective during such periods, quantitative easing measures seem to work comparatively well in uncertain times.

Keywords: Euro area; Monetary policy; Bayesian smooth-transition vector autoregression; Hierarchical global-local shrinkage (search for similar items in EconPapers)
JEL-codes: C32 E32 E52 E58 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268121004261
Full text for ScienceDirect subscribers only

Related works:
Working Paper: On the effectiveness of the European Central Bank's conventional and unconventional policies under uncertainty (2020) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:191:y:2021:i:c:p:822-845

DOI: 10.1016/j.jebo.2021.09.041

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2024-07-06
Handle: RePEc:eee:jeborg:v:191:y:2021:i:c:p:822-845