How far from the target? Effectiveness of the EU monetary policy in times of crisis (original) (raw)
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Studies in Business and Economics, 2012
The problem of monetary policy is a current one, given the fact that now, through this component of the economic policy, the monetary authority of each state tries to solve the problems considered essential for each economy separately. Through this article I have tried to capture the major changes regarding the implementation of the ECB's monetary policy before and after the outbreak of the international financial crisis. Following the analysis I have shown that the monetary policy of the ECB is not a constant one in its actions and instruments used but it is adapted to a conjuncture context through which the European economy is passing through. Therefore, in this paper I have broadly shown the instruments used by the ECB for the monetary policy since the year 2005 up to now. I have thus noticed that the optic of the monetary policy has changed after the outbreak of the crisis, trying to contribute to the economic recovery by boosting the lending. Given the highly complex context through which the economy of the Euro area is going through today, challenges for the ECB for the monetary policy are increasing.
The role and importance of ECB's monetary policy in the global economic crisis
This paper presents the role and importance of the European Central Bank (ECB) in the context of measures and effects that are being taken to repair the consequences of the current economic crisis. The ECB, together with the European single currency, the euro, symbolizes long-lasting monetary integration of the EU states. Such form of integration has created the possibility of a supranational action of ECB in the banking sector and financial markets in general. Along with the other most important central banks in the world, the ECB applies various unconventional instruments of monetary policy to stimulate economic growth and development. In this context, the paper explains the nature and mechanism of such measures in order to influence on the insufficient liquidity in the financial markets.
The Crisis Management of the ECB
Financial and Monetary Policy Studies, 2016
A sequence of crises-the global financial crisis in 2008, the "Great Recession" in 2009 and the subsequent Euro crisis-constituted a major challenge for policy makers. After the fiscal policy had used up its powder in fighting the 2009 recession, monetary policy remained the only expansionary player in the policy arena. The ECB reacted to the crises with applying conventional (interest rate) and unconventional (qualitative easing) measures, however, with a considerable delay to the US Fed. The interest (main refinancing operation) rate was set to zero in September 2014 (the Fed already in December 2008) and the proper QE programme started not until March 2015 (the Fed shortly after the Lehman brothers crash). In evaluating the crisis management of the ECB one must state a clear failure in reaching its own medium term inflation target of 2 percent. However, it was successful in bringing down interest rates for government bonds after Draghi's famous "whatever it takes" speech in July 2012 and the following announcement of the outright monetary transactions programme. Whether ECB's QE programme 2015-2017 will be successful in reaching its primary goal, namely regaining the inflation target of 2 percent is an open question. Simulations with the Global Economic Model of Oxford Economics indicate that it will be able to reach the inflation goal but only with a considerable lag. The impact on the real economy will not be as large as QE experiments in the USA. Other unintended effects-e.g., the creation of bubbles on the stock markets-are larger than the intended effects. In contrast to the usual dynamic stochastic general equilibrium exercises our simulations of ECB's QE with the global economic model can not only quantify the effects for the Euro area as a whole but also for its member countries and it can identify the possible spillovers to countries outside the Euro area.
Implementing monetary policy in the crisis times - the case of the ECB
2000
This paper discusses the implementation of monetary policy during the economic and financial crisis of 2007-10. After summarising the different measures adopted by the ECB during these turbulent times, we present a stylised theoretical model that allows us to focus on the main trade-offs faced in implementing monetary policy. We argue that it is the level of key policy interest
The global Crisis and Unconventional Monetary Policy: ECB versus Fed
2016
In the aftermath of the global economic and financial crisis, which broke-out in 2007, the major central banks started implementing so-called unconventional monetary policy measures. Following a fundamentally qualitative methodology, the aim of this paper is to compare the unconventional measures adopted by the ECB and the Fed, assessing their characteristics and also their impacts on the economy.
The Eurozone area was among the largest victims of the recent global financial crisis, as many member states faced bankruptcy or showed the derailment of their sovereign debts and deceleration of growth, if not recession. The present study tries to shed light on the crucial role of the European Central Bank (ECB) in addressing the severe negative effects of the credit crunch in the Eurozone, based on a qualitative assessment of the data provided on its official published reports. The analysis covers all the related measures taken, both conventional and unconventional, for the time period up to 2014, which focused on addressing the impairments caused in the existing transmission mechanism. Even more, it is pointed out that there is still a long way to run in order to achieve the desirable banking convergence. In conclusion, certain policies are suggested so as the role of ECB to be more effective and ensure financial stability along with equal and sustainable growth among all the member states, a necessary treaty for social welfare.
Strategic and implementation issues regarding ECB Monetary Policy
International Journal of Sciences: Basic and Applied Research, 2020
This paper identifies the impact of the most important ECB’s non-standard monetary policy measures in the euro area. The global recession has been reflected in the slowdown of the U.S. economy and the largest economies of Europe and Asia. The 2008 and 2014 financial crisis hit the European financial system, whereas during 2010 and early 2011 Eurozone faced the hardest time in the so-called debt crisis coupled with a drop in market confidence. Financial markets faced some problems of solvency of countries with higher debt and fiscal deficits, such as the sovereign debt crisis bubbles in Spain and Italy. The European Central Bank reacted by imposing strategic and technical measures to fuel the banks' liquidity needs, to fight a risky credit crisis and to restore investor’s confidence within a heterogeneous Eurozone countries environment. The ECB implemented the unconventional measures, which aimed at lowering and flattening the yield curve by reducing the interest rate level and s...
European Central Bank -Conventional And/Or Unconventional Instruments For Monetary Policy
Muhasebe ve Finansman Dergisi
The mechanisms the monetary policies have failed to foresee, not to mention to prevent the 2008 Financial Crisis (FC). Moreover the burst of the crisis has challenged the market mechanism for maintaining market liquidity, financial stability and risk management. The European Central Bank (ECB) has played crucial role in the aftermath of the 2008 FC for maintaining the market liquidity. The measures taken in the post crisis period were conflicting with the basic foundations of the monetary policy of EMU, but prevented the collapse of the financial market. While the ECB has successfully controlled inflation levels and maintained market liquidity failed to spur growth as expected. The paper discusses the challenges that emerge from these policy measures and provides a recommendation for future actions. Moving away from these measures has been emphasized as one of the main challenges with exiting too early and too late being equally dangerous. The discussion continues with the analysis of the effects and implication in practice of ECB Instruments and their future utilization. The question rises whether the monetary policy should go back to the conventional instruments or maintain excess liquidity and operate the system through parallel adjustments to the deposit facility rate and the rate on the main refinancing operations.