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Spillover of the ECB's Monetary Policy Outside the Euro Area: How Different is Conventional From Unconventional Policy?

Oxana Babecká-Kucharčuková, Peter Claeys () and Bořek Vašíček ()

Working Papers from Czech National Bank

Abstract: This paper studies the macroeconomic impact of ECB policy on the euro area and six non-EMU countries. The analysis is based on the evolution of a synthetic index of overall euro area monetary conditions (MCI) that can be decomposed into conventional and unconventional policy measures. A standard monetary VAR including the MCI subcomponents shows that the transmission of unconventional monetary policy in the euro area is quite different than under conventional policy: prices react quickly, but the response of output (industrial production) is muted. A block-restricted VAR analysis confirms that euro area monetary policy spills over to the macroeconomic developments of non-EMU countries. While conventional monetary policy has a generalised effect on economic activity, exchange rates and prices, unconventional measures have generated a variety of responses. Exchange rates respond rather quickly, but an effect on the real economy is found only for some countries, and inflation remains largely unaffected.

Keywords: ECB; monetary policy; synthetic indicator; unconventional measures; VAR (search for similar items in EconPapers)
JEL-codes: E58 F42 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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Journal Article: Spillover of the ECB's monetary policy outside the euro area: How different is conventional from unconventional policy? (2016) Downloads
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