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Unconventional Monetary Policy, Fiscal Side Effects and Euro Area (Im)balances

Author

Listed:
  • Hachula, Michael
  • Rieth, Malte
  • Piffer, Michele
Abstract
We study the effects and transmission channels of non-standard monetary policy in the euro area using structural vector autoregressions, identified with an external instrument. The instrument is the common component of unexpected variations in euro area sovereign yields vis-à-vis Germany for different maturities on policy announcement days. We find that expansionary monetary surprises are effective in stimulating economic activity, prices and inflation expectations. Shock transmission functions through public and private interest rates, asset prices and credit conditions. The policy innovations, however, also lead to a rise in primary public expenditures, a divergence of relative prices within the union and a widening of internal trade balances.

Suggested Citation

  • Hachula, Michael & Rieth, Malte & Piffer, Michele, 2016. "Unconventional Monetary Policy, Fiscal Side Effects and Euro Area (Im)balances," VfS Annual Conference 2016 (Augsburg): Demographic Change 145790, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc16:145790
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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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