Abstract
This paper explores the relationship between financial conditions and real economic activity in the euro area as a whole and for Greece in particular. We use a financial conditions index (see Angelopoulou et al., 2014) which is constructed using a wide range of prices, quantities, spreads and survey data in line with theory. We update the indices and use them within a VAR framework to estimate the potential impact of the TLTROs on aspects of economic activity. Our results suggest that financial conditions do have a significant effect on economic activity and thus the TLTROs, to the extent that they are designed to improve financial conditions, will provide a boost to the real economy.
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