Domestic and International Effects of the Eurosystem Expanded Asset Purchase Programme: A Structural Model-Based Analysis
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This paper evaluates the domestic and international macroeconomic effects of the Eurosystem’s Asset Purchase Programme (APP) by means of a calibrated three-country dynamic general equilibrium model of the world economy. We find that the APP boosts domestic inflation and economic activity as liquidity increases and long-term interest rates fall. International spillovers are expansionary, and their size depends on the monetary policy stance of partner countries and on the response of international relative prices.
JEL ClassificationE44 E52 E58
The opinions expressed are those of the authors and do not reflect views of the Bank of Italy or the World Bank. Any remaining errors are the sole responsibility of the authors.
We would like to thank for insightful comments Pau Rabanal of the editorial board and two anonymous referees. We have also benefited from discussions with Lorenzo Burlon, Giancarlo Corsetti, Alberto Locarno, Alessandro Notarpietro, Fabrizio Perri, Alfonso Rosolia, Enrico Sette, colleagues of the Monetary Analysis Division, and participants at the July meeting of the Monetary Policy Committee (2015), and Bank of Italy lunch seminar (2015).
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