Important time series evidence about the efficacy of the ECB’s balance sheet policies is flawed

Adam Elbourne, Kan Ji and Bert Smid, (2019), “Important time series evidence about the efficacy of the ECB’s balance sheet policies is flawed”, VoxEU, 13 Μαρτίου

Previous research has shown that changes to the size of the ECB’s balance sheet were followed by meaningful changes in macroeconomic aggregates. This column argues that the econometric technique these studies employed does not provide reliable estimates. Impulse responses to purported balance sheet shocks are statistically indistinguishable from those from nonsensical identification schemes. The effectiveness of the ECB’s balance sheet policies is therefore still unproven.

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