Assessing ECB Quantitative Easing: One Year On: In depth analysis

"This policy contribution was prepared on request of the ECON Committee of the European Parliament for the Monetary Dialogue with the President of the European Central Bank on 02/06/2016 (http://www.europarl.europa.eu/committees/en/econ/monetary-dialogue.html). Copyright remains with the European Parliament at all times". © 2016 European UnionDISCLAIMER The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of the European Parliament. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is given prior notice and sent a copy."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 in-depth analysis by key monetary experts is provided in this compilation. The notes have been requested by the Committee on Economic and Monetary Affairs as an input for the June 2016 session of the Monetary Dialogue."The ECB’s expanded asset purchase programme (EAPP) adds the purchase programme for public sector securities to the existing private sector asset purchase programmes to address the risks of a too prolonged period of low inflation. It now consists of a covered bond purchase programme (CBPP3), asset- backed securities purchase programme (ABSPP) and public sector purchase programme (PSPP). However, as the transmission mechanisms of monetary policy remains characterized by long, variable and uncertain time lags, the impact of asset purchases on the real economy continues to be a matter of discussion as confirmed by the slow recovery in bank lending. Some economists even argue that the most effective transmission channel of unconventional monetary policy is the exchange rate. Against this backdrop, the note assesses the effectiveness of the ECB programme of asset purchases one year after its first implementation.European Parliament - Monetary Policy Dialogu