The effect of conventional and unconventional euro area monetary policy on macroeconomic variables

We investigate the e ect of monetary policy on European macroeconomic variables using a small-scale vector autoregression (VAR) and the "Effective Monetary Stimulus" (EMS). The EMS is a monetary policy metric obtained from yield curve data that is designed to consistently reflect the overall stance of monetary policy across conventional and uncoventional monetary policy environments. Empirically, using the EMS in our VAR obtains plausible and stable structural relationships with prices and output developments across and within conventional and unconventional environments, and more so than short-maturity rates or alternative metrics, suggesting that it provides a useful practical monetary policy metric for policy makers. The VAR results show that European monetary policy shocks have been accommodative since 2007, although their e ect has become more uncertain compared to the conventional policy period.