Euro Area Monetary Policy in Uncharted Waters

Author/Editor:

Emil Stavrev ; Thomas Harjes ; Martin Cihak

Publication Date:

August 1, 2009

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

We analyze the European Central Bank's (ECB's) response to the global financial crisis. Our results suggest that even during the crisis, the core part of ECB's monetary policy transmission-from policy rates to market rates-has continued to operate, but at a decreased efficiency. We also find some evidence that the ECB's non-standard measures, namely the lengthening of the maturity of monetary policy operations and the provision of funds at the fixed rate, reduced money market term spreads, facilitating the pass-through from policy to market rates. Furthermore, the results imply that the substantial increase in the ECB's balance sheet may have contributed to a reduction in government bond term spreads.

Series:

Working Paper No. 2009/185

Subject:

Banking Bond yields Central bank policy rate Financial crises Yield curve

English

Publication Date:

August 1, 2009

ISBN/ISSN:

9781451873320/1018-5941

Stock No:

WPIEA2009185

Pages:

34

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