Macro-effectiveness of Unconventional Monetary Policy: A Structural VAR Analysis in an Economic and Monetary Union

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Eryılmaz F., Yılmaz D.

Social Sciences Research Journal (SSJR), vol.9, no.1, pp.209-229, 2020 (Peer-Reviewed Journal)

  • Publication Type: Article / Article
  • Volume: 9 Issue: 1
  • Publication Date: 2020
  • Journal Name: Social Sciences Research Journal (SSJR)
  • Journal Indexes: Other Indexes
  • Page Numbers: pp.209-229
  • Bursa Uludag University Affiliated: Yes


During the 2008 Global Economic Crisis Central Banks could not be able to abate the financial tensions and

expand the real economy with conventional monetary policy- interest rate. Thus, central banks had to implement

new monetary policy measures: liquidity injections, asset purchases and forward guidance which are called

unconventional monetary policies. Major central banks pursued unconventional monetary policy measures and

expanded their balance sheets’ accordingly. ECB – like its counterparts- also used these policies in order to calm

financial markets and stimulate aggregate demand. In this study, we are aiming to analyze the effectiveness of

these unconventional monetary policy measures. We built our analysis on Structural VAR methodology and use

the size of the balance sheet of the ECB as an indicator of unconventional monetary policy. Our results suggest

that, ECB’s unconventional monetary policy is effective on reviving the real economy but not on relieving the

financial market stress.