On the effectiveness of the European Central Bank's conventional and unconventional policies under uncertainty
Hauzenberger, Niko and Pfarrhofer, Michael and Stelzer, Anna (2021) On the effectiveness of the European Central Bank's conventional and unconventional policies under uncertainty. Journal of Economic Behaviour and Organization, 191. pp. 822-845. ISSN 0167-2681 (https://doi.org/10.1016/j.jebo.2021.09.041)
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Abstract
In this paper, we investigate the effectiveness of conventional and unconventional monetary policy measures by the European Central Bank (ECB) conditional on the prevailing level of uncertainty. To obtain exogenous variation in central bank policy, we rely on high-frequency surprises in financial market data for the euro area (EA) around policy announcement dates. We trace the dynamic effects of shocks to the short-term policy rate, forward guidance and quantitative easing on several key macroeconomic and financial quantities alongside survey-based measures of expectations. For this purpose, we propose a Bayesian smooth-transition vector autoregression (ST-VAR), using a measure of economic policy uncertainty as signal variable. Our results suggest that transmission channels are impaired when uncertainty is elevated. While conventional monetary policy and forward guidance can be less effective during such periods, quantitative easing measures seem to work comparatively well in uncertain times.
ORCID iDs
Hauzenberger, Niko ORCID: https://orcid.org/0000-0002-2683-8421, Pfarrhofer, Michael and Stelzer, Anna;-
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Item type: Article ID code: 86864 Dates: DateEvent30 November 2021Published16 October 2021Published Online25 September 2021Accepted29 November 2020SubmittedSubjects: Social Sciences > Economic Theory > Methodology > Mathematical economics. Quantitative methods > Econometrics
Social Sciences > Commerce > Business > Personnel management. Employment management
Social Sciences > FinanceDepartment: Strathclyde Business School > Economics Depositing user: Pure Administrator Date deposited: 05 Oct 2023 13:04 Last modified: 21 Sep 2024 00:45 URI: https://strathprints.strath.ac.uk/id/eprint/86864