Global macroeconomic effects of exiting from unconventional monetary policy

Pietro Cova, Patrizio Pagano () and Massimiliano Pisani

No 1078, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper evaluates the international macroeconomic spillovers from the Eurosystem’s expanded Asset Purchase Programme (APP) under alternative assumptions as regards (i) the unwinding of the asset positions accumulated under the APP and (ii) the normalization of the US monetary policy stance. We simulate a dynamic general equilibrium model of the world economy, calibrated to the Euro area (EA), the US, China, Japan, and the ‘rest of the world’ (RW). Our results are as follows. First, APP expansionary spillovers are dampened if the Eurosystem brings forward the unwinding of its bond holdings because of the lower increase in EA aggregate demand and, therefore, EA imports. The RW is the region most affected because it has the greatest trade integration with the EA. Second, if the US monetary authority announces that it will hold the policy rate constant for a shorter period of time – which dampens the increase in US aggregate demand and, therefore, US imports from the EA – then US spillovers to the EA, while still expansionary, as in the case of a slower normalization of the monetary policy stance, are more modest.

Keywords: DSGE models; open-economy macroeconomics; non-standard monetary policy; zero lower bound (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 E58 (search for similar items in EconPapers)
Date: 2016-09
New Economics Papers: this item is included in nep-cba, nep-dge, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.bancaditalia.it/pubblicazioni/temi-disc ... 078/en_tema_1078.pdf (application/pdf)

Related works:
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:bdi:wptemi:td_1078_16

Access Statistics for this paper

More papers in Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by ().