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Unconventional monetary policy of the ECB during the financial crisis: An assessment and new evidence

Christiaan Pattipeilohy, Jan Willem End (), Mostafa Tabbae, Jon Frost () and Jakob de Haan ()

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: We first sketch how central banks have used unconventional monetary policy measures by using three indicators based on the composition of the balance sheet of eleven central banks. Our analysis suggests that although the ECB's balance sheet has increased dramatically during the crisis, the non-standard monetary policy measures had only a moderate impact on the composition of the ECB's balance sheet compared to other central banks, such as the Fed and the Bank of England. Next, we take stock of research analysing the effects of unconventional monetary policy of the ECB after the onset of the crisis. A crucial question is to what extent these measures have been able to affect interest rates, thereby restoring the monetary policy transmission process and supporting the central bank objectives. Finally, we offer new evidence on the effectiveness of the ECB's unconventional monetary policy measures, i.e. extended liquidity provision (LTRO) and the Securities Market Programme (SMP). Our results suggest that the LTRO interventions in general had a favorable (short-term) effect on government bond yields. Changes in the SMP only had a visible downward effect on bond yields in Summer 2011, when the program was reactivated for Italy and Spain, but this effect dissipated within a few weeks.

Keywords: unconventional monetary policy; non-standard monetary policy; central bank balance sheet; European Central Bank (search for similar items in EconPapers)
JEL-codes: E40 E50 E58 E60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
Date: 2013-05
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:381

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