Macroeconomic impact and yield curve: evidence from Eurozone data and unconventional monetary policy

Details

Supervisors

Rychalovska, Yuliya

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation économétrie, à finalité approfondie

Abstract

MY EASY Paper - This paper provides a comprehensive review of the existing literature concerning the identification of unconventional monetary policy surprises and estimation of macroeconomic effect, utilizing high-frequency data on yield curve fluctuations during Europe Central Bnak (ECB) monetary policy communication windows. We provide insights into several representative studies and examine the difficulties encountered in the identification of these unconventional monetary surprises. Our investigation also highlights that the bank lending channel is often overlooked in the VAR models utilized by these studies when assessing macroeconomic effects through the use of these surprises as external instruments. To address this gap, we propose an augmented proxy-SVAR model that incorporates bank lending rates as endogenous variables. Our findings indicate a persistent negative effect of expansive ECB forward guidance surprise shocks on bank lending rates, along with a notable 40-month lagged decrease in unemployment in response to these expansive forward guidance surprise shocks.Additionally, we observe that forward guidance surprise exert a more pronounced influence on output compared to quantitative easing surprise of equivalent shock scale.