Unconventional Monetary Policy, Fiscal Side Effects and Euro Area (Im)balances

Michael Hachula, Michele Piffer and Malte Rieth ()

No 1596, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We study the macroeconomic effects of unconventional monetary policy in the euro area using structural vector autoregressions, identified with an external instrument. The instrument is the common unexpected variation in euro area sovereign spreads for different maturities on policy announcement days. We first show that expansionary monetary surprises are effective at lowering public and private interest rates and increasing economic activity, consumer prices, and inflation expectations. We also find, however, that the shocks lead to a rise in primary public expenditures, a divergence of consumer prices within the union, and a widening of internal trade balances.

Keywords: Central banks; structural VAR with external instruments; fiscal policy; monetary union (search for similar items in EconPapers)
JEL-codes: E52 E58 E63 (search for similar items in EconPapers)
Pages: 39 p.
Date: 2016
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Journal Article: Unconventional Monetary Policy, Fiscal Side Effects, and Euro Area (Im)balances (2020)
Journal Article: Unconventional Monetary Policy, Fiscal Side Effects and Euro Area (Im)balances (2020)
Working Paper: Unconventional Monetary Policy, Fiscal Side Effects and Euro Area (Im)balances (2016)
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