Claeys, G. (2014) “The (not so) Unconventional Monetary Policy of the European Central Bank since 2008“, Policy Department A for the Monetary Dialogue discussions in the Economic and Monetary Affairs Committee (ECON) of the European Parliament, 09 July.
The global financial and economic crisis forced major central banks to act swiftly and to innovate to avoid a free fall of their economies. This paper reviews in depth the measures adopted by the European Central Bank, and compares them with the ones adopted by the Federal Reserve and the Bank of England since 2008. The ECB has been very active since the beginning of the crisis and its actions helped the financial sector to avoid a complete meltdown. However, the ECB adopted measures that were mainly directed at ensuring the provision of liquidity and repairing the bank-lending channel, through changes to its usual framework for the implementation of monetary policy. By contrast, the Fed and the Bank of England quickly pursued unconventional monetary policies by implementing quantitative easing programmes that appeared to have a positive impact on financial variables and also on the real economy. Today, the ECB is confronted by inflation well below 2% and has reacted by implementing a broad package of fairly conventional measures. This analytical note pleads for the ECB to implement a large-scale asset-purchase programme and makes recommendations about the design of such a programme.
Relevant posts:
- Fuertes Α.-Μ., Kalotychou , Ε. & Saka, Ο. (2014) “ECB Policy and Eurozone Fragility: Was De Grauwe Right?“, Economic Policy, CEPS Working Documents, 20 June.
- Magnus, G. (2014) “The ECB and Sisyphus: it won’t be finished unless it does QE“, Pieria Online, 09 June.
- Varoufakis, Y. (2014) “How should the ECB enact Quantitative Easing? A proposal“, Thoughts for the post-2008 World Blog, 19 May.