An Assessment of the ECB’s Unconventional Monetary Policies

Abstract

This study evaluates the effectiveness of the European Central Bank’s unconventional monetary policy. We assume Calvo-type friction and develop a forward-looking New Keynesian state-space model with an error correction term to address both unit roots and stationary variables at once. Subsequently, we decompose the nominal effects into asset pricing kernels and real effects. Thus, we show empirically that the corporate sector purchase program (CSPP) and CSPP-based bank lending to households positively affect trend inflation due to credit easing. However, due to asymmetric development within the European Union and the Euro area, there is no consensus on whether they should be continued after the crisis.

JEL classification:C32, E12, E52, E58, F33.