Persistent low inflation in the euro area
The huge literature on the causes of the persistent weakness in inflation in the euro area has not identified one single key factor. Moreover, inflation has also been lower than expected in many advanced countries. Low inflation expectations seem to have played an important role in reducing wage demand, both in the US and the […]
Implications of the expanding use of cash for monetary policy
Financial innovation seems to have had little impact on the oldest medium of transaction, namely cash. The ratio of currency in circulation to GDP has increased in most countries, independently of the continuing spread of cashless transactions. Currency is part of the monetary base. Its increase thus leads to an automatic increase in central banks’ […]
Side effects of non-standard monetary policy
In the short- to medium-run, non-standard monetary policy helps to stimulate the economy and stabilize financial markets. However, it is also widely acknowledged that side effects tend to materialize in the medium- to long-run. Thus, the time dimension is a crucial factor in assessing the riskiness of this policy approach. For the February 2017 session […]
How do low and negative interest rates affect banks’ profitability in the euro area?
Critics of ECB loose monetary policy warn against the risk that this policy squeezes banks’ profits, which could ultimately lead to higher lending rates and lower credit supply. This discussion has arisen in the euro area in particular, as banks’ profitability is low on average and some banks are burdened by a huge amount of […]
Ultra-low/Negative yields on euro-area long-term bonds
The notes in this compilation discuss the main factors underlying the extraordinary low levels of long-term rates across the euro area, assess the risks for financial stability and the implications for ECB monetary policy. The notes have been requested by the Committee on Economic and Monetary Affairs as an input for the September 2016 session […]
Effectiveness of the ECB programme of asset purchases
More than one year after the first implementation of the ECB programme of asset purchases, it is appropriate to assess its effectiveness and discuss pros and cons of potential further expansions. An inprovided in this compilation. The notes depth analysis by key monetary experts is have been requested by the Committee on Economic and Monetary […]
Limits in terms of eligible collateral and policy risks of an extension of the ECB’s quantitative easing programme
At the press conference following the ECB Governing Council meeting of 3 December 2015, the President of the ECB Mario Draghi reiterated the readiness of the ECB to adopt, if necessary, additional measures – in terms of size, composition and duration of the of the asset purchase programme EAPP – in order to maintain an […]
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