Non-conventional monetary policy of the European Central Bank during the financial crisis

Abstract

The beginning of the financial crisis, the largest since 1929, had a devastating impact on the economy of the European Union and created a disruption in the macroeconomic indicators affecting GDP growth (-2.8% in 2009), unemployment rate (11% in 2013) or inflation, which remained negative in the second half of 2009. The economy had a problem with the banking sector and they were bailed in with public capital. After this first period, the public debt crisis came up immediately, pushing the European Central Bank to give facilities to the countries in many ways. This framework lead into a historical period in terms of economic measures, intended to dynamize the Eurozone’s economy. An extraordinary battery of expansive monetary policies was implemented to provide liquidity to the system and maintain inflation at acceptable levels. For the first time in history, interest rates where below cero (the situation is maintained nowadays) and this factor motivated the current paper.