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Projeto de investigação
Essays on Unconventional Monetary Policy
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Do the projected fiscal deficits play a role in ECB monetary policymaking?
Publication . Jurkšas, Linas; Pereira, Francisco Gomes
We estimate a large number of alternative monetary policy reaction functions for the ECB in order to robustly
find if fiscal stance matters for the monetary policy conduct. We use GMM and SVAR methods to estimate
inflation-output reaction functions with and without a fiscal deficit indicator from 2001 until 2022 with the
thick-modelling approach. The results revealed that ECB actions have exhibited desirable stabilising monetary
policy properties and have generally been found to be consistent with the Taylor principle. Most importantly,
the projected euro area fiscal deficit usually is not statistically significant in explaining ECB monetary policy
stance. Nevertheless, when the fiscal deficit indicator is statistically significant, the sign of its coefficient is
always positive, implying that increasing deficits lead to a more restrictive monetary policy stance. These
findings speak against the “fiscal dominance” regime in the euro area where monetary policy is single and
fiscal policies are decentralised. The results remain qualitatively similar independent of the precise
specification of the GMM and SVAR models and if the sample period is shortened from 2012.
Balance sheet expansionary policies in the Euro Area : macroeconomic impacts and a vulnerable versus non-vulnerable comparison : a Bayesian structural VAR approach
Publication . Pereira, Francisco Gomes
Employing a Bayesian structural vector autoregressive (VAR) model, we estimate the impact
of the European Central Bank’s (ECB) balance sheet expansionary policies (BSEP) on a range
of economic and financial variables including real GDP, inflation, long-term sovereign bond
yields, systemic stress, unemployment, bank loans, and equity markets in the period from
2009:Q1 to 2021:Q4. The main conclusion from this study is that more vulnerable euro area
countries had larger magnitudes in desirable impulse responses to BSEPs shocks. To reach
this conclusion, we estimated the same model for 16 euro area countries and used maximum,
minimum, and cumulative impulse responses to assess the heterogenous responses to BSEPs
across member states. We then attempt to find correlations of impulse responses with measures
of financial and economic vulnerability such as debt-to-GDP ratios, unemployment, GDP per
capita (PPP), and tier 1 bank capital ratios. Our results suggest that the magnitude of the
responses are more pronounced in countries with higher levels of vulnerability. These findings
are akin to theoretical assumptions that suggest that unconventional monetary policies are
most effective in periods of severe systemic stress.
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Entidade financiadora
Fundação para a Ciência e a Tecnologia
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OE
Número da atribuição
2021.06646.BD