THE MACROECONOMIC EFFECTS OF QUANTITATIVE EASING POLICIES

The Effects of Quantitative Easing in the Eurozone: a Difference-in-Differences Approach CHAPTER 3 The empirical analysis in this paper continues with an assessment of the macro effects of Quantitative Easing (QE) in the Eurozone. QE is well represented by the increase of domestic assets in the balance sheet of the European Central Bank (started in 2015) with the main aim of boosting the European economy recovery. Considering the main scope of this unconventional monetary policy, I selected some macro and monetary variables that represent the targets of this manoeuvre. The estimates are carried out using a difference-indifferences methodology, that adopts an occurring event to create a policy shift between two groups and allows a before and after comparison across them. The Eurozone countries represent the ‘treated’ group, while the ‘control’ group is formed by the remaining countries of the European Union that do not join the Euro Area. Accordingly, the main questions are: (1) has this non-traditional policy had any effects on those selected macro and monetary variables? (2) If so, what is the magnitude of QE in the Eurozone compared to the other European countries that were not involved in this policy? In conclusion, an Appendix Section is proposed that contains a supplemental analysis for the study of the effects of QE in the Eurozone. In this section, the potential output growth of the single 19 Member States of the Euro Area is estimated using an AS state-space model and a Kalman filter methodology, and then, the impact of QE on that series through an ordinary least squares regression is investigated. Keywords: quantitative easing, unconventional monetary policies, Eurozone, difference-in-differences. JEL Codes: E52, E58, C13, C33 Supervisor: Professor Marco Alberto De Benedetto