Spillover of the ECB’s Monetary Policy outside the Euro Area: How Different is Conventional from Unconventional Policy?

Abstract

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Since the global financial crisis, central banks like the ECB have employed unconventional measures to stabilize the financial sector. Despite debate over their effectiveness, studies generally indicate positive impacts on Eurozone banking and financial markets, averting further economic decline. However, these policies can challenge other countries due to international spillovers, affecting capital flows and exchange rates. Understanding the effects of ECB policies on neighboring countries is crucial, yet empirical evidence remains limited. Recent ECB policies, including quantitative easing, have shown significant impacts on Eurozone monetary conditions, spilling over to neighboring non-euro area economies, albeit with varied effects on industrial production and inflation.