The Perception of Unconventional Economic Policies and Their Effectiveness: An International Assessment

Abstract

This paper estimates, using structural VARs, the spillover effects of unconventional fiscal and monetary policies implemented in the United States and in the Eurozone during the last decade. Consumer confidence and investor sentiment indicators are introduced in the models in order to highlight the signalling channel in the responses to economic policy innovations in time of crisis. The results reveal that policy measures that increase confidence strengthened the cross-country macroeconomic linkages in time of crisis recovery in a zero lower bound context. Moreover, a transparent and harmonized policy mix between the countries is a prerequisite for ensuring short-term growth after a global financial crisis.