Why Has ECB’s Very Accommodative Monetary Policy Not Yet Triggered a Rebound of Investment?

The European Central Bank has adopted a series of unconventional monetary policy measures to combat the financial crisis and ward off the risks of a too prolonged period of low inflation. The policy package has led to a tangible improvement in borrowing conditions for both households and firms. Sovereign bond rates have reached record low levels even at relative long maturities in several euro-area countries.

In theory lower financing costs should support consumption and investment via the increase in bank lending and bond or stock issuance. In practice the main beneficiaries of ECB very accommodative monetary policy seem to be for governments via lower interest payments, while the effects on private spending and, in particular, capital formation have been limited, so far.

See also a related Briefing (see related url hyperlinks below) 'Effectiveness of the ECB Programme of Asset Purchase: Where Do We Stand?' - The European Central Bank Expanded Asset Purchase Programme adds the purchase programme for public sector securities to the existing private sector asset purchase programmes to address the risks of a too prolonged period of low inflation. It consists of a third covered bond purchase programme , asset-backed securities purchase programme (ABSPP) and public sector purchase programme.

• Primary Source

ESO: Background information: Monetary policy decisions, 10 March 2016 / ECB adds corporate sector purchase programme (CSPP) to the asset purchase programme (APP) and announces changes to APP / ECB announces new series of targeted longer-term refinancing operations (TLTRO II) http://www.europeansources.info/record/monetary-policy-decisions-10-march-2016-ecb-adds-corporate-sector-purchase-programme-cspp-to-the-asset-purchase-programme-app-and-announces-changes-to-app-ecb-announces-new-series-of-targeted/

ESO: Background information: Monetary easing by the ECB [What Think Tanks are thinking] http://www.europeansources.info/record/monetary-easing-by-the-ecb-what-think-tanks-are-thinking/

ESO: Background information: The ECB's Quantitative Easing. Early results and possible risks http://www.europeansources.info/record/the-ecbs-quantitative-easing-early-results-and-possible-risks/

EPRS: Briefing: Monetary Dialogue, June 2016: Effectiveness of the ECB Programme of Asset Purchase: Where Do We Stand? http://www.europarl.europa.eu/RegData/etudes/BRIE/2016/578999/IPOL_BRI(2016)578999_EN.pdf

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