The Macroeconomic Effects of Quantitative Easing in the Euro Area: Evidence from an Estimated DSGE Model

This paper analyses the macroeconomic effects of the European Central Bank’s quantitative easing programme using an open-economy DSGE model estimated with Bayesian techniques. The detailed modelling of QE and portfolio adjustment allows us to capture a large number of the transmission channels put forward in the literature, including the saving, financing cost, exchange rate, inflation, and fiscal channels. We use data on government debt stocks and yields across maturities to identify the parameter governing portfolio adjustment in the private sector. Shock decompositions of EA real GDP and GDP deflator growth suggest a positive contribution of ECB QE to EA year-on-year output growth and (GDP price) inflation of up to 0.4 and 0.5 pp, respectively, in the standard linearized version of model. Allowing for an occasionally binding zero-bound constraint on monetary policy by using piecewise linear solution techniques raises the positive impact of QE on EA real GDP growth and inflation to 0.8 and 0.6 pp, respectively.

HOHBERGER Stefan;  PRIFTIS Romanos;  VOGEL Lukas; 

2017-03-21

European University Institute

JRC105774

1725-6704,   

http://cadmus.eui.eu/browse?value=VOGEL%2C,    Lukas&type=author,    https://publications.jrc.ec.europa.eu/repository/handle/JRC105774,