Journal
JOURNAL OF ECONOMIC DYNAMICS & CONTROL
Volume 108, Issue -, Pages -Publisher
ELSEVIER
DOI: 10.1016/j.jedc.2019.103756
Keywords
Bayesian estimation; Open-economy DSGE model; Portfolio rebalancing; Quantitative easing; Zero lower bound
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This paper estimates an open-economy dynamic stochastic general equilibrium (DSGE) model with Bayesian techniques to provide a structural empirical evaluation of the macroeconomic effects of the European Central Bank's (ECB's) quantitative easing (QE) programme. Allowing for cross-border holding of government debt and using data on government debt stocks and yields across maturities, we identify the parameters governing portfolio rebalancing in the private sector. We rely on a methodological extension that measures the non-linear contribution of QE in shock decompositions under an occasionally binding constraint (zero lower bound). Our results suggest an average contribution of ECB QE to annual Euro Area GDP growth and CPI inflation in 2015-18 of 0.3 and 0.5 percentage points, respectively, with a maximum impact in 2016. (C) 2019 Elsevier B.V. All rights reserved.
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