Macroeconomic Effects of Non‐Standard Monetary Policy Measures in the Euro Area: The Role of Corporate Bond Purchases

Abstract

This paper evaluates the macroeconomic effects of the European Central Bank’s Corporate Sector Purchase Programme (CSPP) when the monetary policy rate hits the zero lower bound (ZLB). To this purpose, we calibrate and simulate a monetary union dynamic general equilibrium model of the euro area (EA). We assume that entrepreneurs can finance their spending by issuing corporate bonds or through banking loans. Our results are as follows. First, the CSPP boosts GDP in both EA regions by about 0.3 percentage points (ppt) relative to the ZLB scenario. Inflation rises as well. Given the improvement in economic conditions, the EA monetary policy rate stays at the ZLB for a shorter amount of time. Second, the CSPP indirectly stimulates banking activity. Third, the two regions benefit in a similar way from the CSPP. Fourth, the duration of the program is relevant for its effectiveness. Finally, results are robust to changes in key parameters.