The effect of ECB monetary policies on interest rates and volumes

This paper assesses the transmission of ECB monetary policies, conventional and unconventional, to both interest rates and lending volumes or bond issuance for three types of different economic agents through five different markets: sovereign bonds at 6-month, 5- year and 10-year horizons, loans to non-financial corporations, and housing loans to households, during the financial crisis, and for the four largest economies of the Euro Area. We look at three different unconventional tools: excess liquidity, longer-term refinancing operations and securities held for monetary policy purposes following the decomposition of the ECB’s Weekly Financial Statements. We first identify series of ECB policy shocks at the Euro Area aggregate level by removing the systematic component of each series and controlling for announcement effects. We second include these exogenous shocks in countryspecific structural VAR, in which we control for the credit demand side. The main result is that only the pass-through from the ECB rate to interest rates has been effective. Unconventional policies have had uneven effects and primarily on interest rates.