The unconventional measures of the ECB are likely to have negative side effects the longer they are in operation. But these side effects concern financial stability and are an unavoidable pollution of future monetary policy with fiscal effects. It is highly unlikely, however, that the unconventional measures of the ECB will have had a measurable negative impact on productivity. In any event, the impact of the ECB’s policy on investment seems to have been very limited. One of the reasons is that a major element in investment decisions is the risk premium on equity capital, which cannot be influenced by monetary policy and which has remained elevated. The available data on the composition of investment also do not suggest that ultralow interest rates on most secure debt instruments have distorted investment flows towards low productivity areas.
This project was awarded under the Framework Service Contract for the provision of external expertise in the field of monetary and economic affairs (Monetary dialogues) (IP/A/ECONMD/FWC/2014-026/C6) with the European Parliament. The full list of CEPS’ Framework Contracts is available here.