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Assessing the efficacy, efficiency and potential side effects of the ECB’s monetary policy instruments since 2014

Carlo Altavilla, Wolfgang Lemke, Tobias Linzert, Jens Tapking and Julian von Landesberger

No 278, Occasional Paper Series from European Central Bank

Abstract: This paper summarises the work done by Eurosystem staff in the context of the Strategy Review Seminar on Monetary Policy Instruments. More specifically, it focuses on the efficacy, efficiency and potential side effects of the key monetary policy instruments employed by the European Central Bank since 2014. The following main findings emerge from the analysis. First, instruments have been effective in easing financing conditions and supporting economic growth, employment and inflation. Second, considering the effective lower bound on policy rates, a combination of instruments is generally more efficient than relying on a single tool. Third, side effects have been generally contained so far, but they are found to vary over time and need to be closely monitored on an ongoing basis. Fourth, the monetary policy toolkit needs to remain innovative, diversified, and flexible, i.e. reviewed regularly to ensure that it remains fit for purpose against the backdrop of evolving financial and macroeconomic conditions. JEL Classification: E52, E58, E43, E44, E47

Keywords: monetary policy instruments; standard and non-standard measures (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-isf, nep-mac and nep-mon
Note: 2279334
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Citations: View citations in EconPapers (8)

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