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SVARs, the central bank balance sheet and the effects of unconventional monetary policy in the euro area

Adam Elbourne ()

CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: This discussion paper presents further evidence that the most important published estimates of the effects of unconventional monetary policy are not reliable. It is a further elaboration of the ideas in the CPB discussion paper "Do zero and sign restricted SVARs identify unconventional monetary policy shocks in the euro area?". Previous empirical studies seem to show that the unconventional monetary policy of the ECB, also known as balance sheet policy, has a positive effect on growth and inflation. However, this conclusion is unfounded, because institutional features of monetary policy in the euro area make it impossible to identify unexpectedly exogenous variation in monetary policy. Read CPB Discussion Paper 391 "Do zero and sign restricted SVARs identify unconventional monetary policy shocks in the euro area?". VAR modeling shows the effects of unexpected exogenous variation in monetary policy, also known as policy shocks. This discussion paper presents a number of reasons why the existing literature is unable to isolate unexpected variation in monetary policy.

JEL-codes: C32 E52 (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-mac and nep-mon
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