Monetary policy under economic uncertainty : Evidence from the Euro Area

Tools

Hauzenberger, Niko and Pfarrhofer, Michael and Stelzer, Anna (2025) Monetary policy under economic uncertainty : Evidence from the Euro Area. SUERF Policy Brief (No 124). Société Universitaire Européenne de Recherches Financières (SUERF).

[thumbnail of SUERF-Policy-Brief-1248_Hauzenberger_Pfarrhofer_Stelzer]
Preview
 Text. Filename: SUERF-Policy-Brief-1248_Hauzenberger_Pfarrhofer_Stelzer.pdf
Final Published Version
Download (761kB)| Preview

Abstract

This brief examines the impact of economic uncertainty on the effectiveness and transmission of monetary policy, focusing particularly on the euro area. After discussing market- and news-based uncertainty indicators, we examine how uncertainty interacts with conventional and unconventional monetary policy tools. Our findings reveal that conventional measures, such as interest rate adjustments, are significantly less effective during periods of high uncertainty. In contrast, unconventional tools, particularly quantitative easing, maintain their effectiveness. These results emphasize the importance of tailoring monetary policy strategies to prevailing levels of uncertainty and highlight the crucial role of central bank communication in improving policy transmission.

ORCID iDs

Hauzenberger, Niko ORCID logoORCID: https://orcid.org/0000-0002-2683-8421, Pfarrhofer, Michael and Stelzer, Anna;
CORE (COnnecting REpositories)