Global Macroeconomic Effects of Exiting from Unconventional Monetary Policy

  • P. Cova
  • P. Pagano
  • M. PisaniEmail author
Conference paper


This paper evaluates the international macroeconomic effects of the Eurosystem’s expanded Asset Purchase Programme (APP) under alternative assumptions about (i) the unwinding of the asset positions accumulated under the APP and (ii) the normalization of the U.S. monetary policy stance. We simulate a five-region New Keynesian model of the euro area (EA) and the world economy (calibrated to the EA, US, China, Japan, and a residual region labelled “rest of the world”, RW). Our results suggest that an early exit from the APP, by severely dampening its effectiveness in stimulating the EA economy, dampens the EA aggregate demand and, therefore, EA imports. The expansionary international spillovers are, as such, reduced. Spillovers from the US to the EA are expansionary but always modest. This being the case, it becomes even more crucial to correctly identify the appropriate point in time to exit EA non-standard monetary policy measures.



We thank Martina Cecioni, Stefano Siviero, and participants at the Banca dItalia Workshop “Unconventional monetary policy: effectiveness and risks” (March 2016) and Villa Mondragone International Economic Seminar “Getting globalization right. Sustainability and inclusive growth in the post Brexit age” (June 2017) for useful comments. 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.


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© Springer Nature Switzerland AG 2018

Authors and Affiliations

  1. 1.Banca d’ItaliaRomeItaly
  2. 2.The World BankWashingtonUSA

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