Evaluating the Macroeconomic Effects of the ECB's Unconventional Monetary Policies

Abstract

We quantify the macroeconomic effects of the European Central Bank’s unconventional monetary policies using a dynamic stochastic general equilibrium model, which includes the shadow Eonia rate. Extracted from the yield curve, this shadow rate provides an unconstrained measure of the overall stance of monetary policy. Counterfactual analyses show that, without unconventional measures, the euro area would have suffered (i) a cumulative loss of output of around 19% of its pre-crisis level since the Great Recession, (ii) a deflation episode in 2009 and (iii) a slowdown in price increases in 2015 and 2016.