The effects of ECB's monetary policy on growth: a sovereign bonds pricing approach

Journal of Economic Studies. 2026. P. 1–18.

Rincon C. J.

Purpose

This study assesses the impact of the European Central Bank's (ECB) Unconventional Monetary Policy (UMP) on economic growth via its effects on sovereign bond yields in the Eurozone. Unlike previous studies that focus on high-frequency data and short-term effects, this study provides evidence on the long-term effects of the ECB's asset purchases on key macroeconomic variables such as GDP and Industrial Production growth.

Design/methodology/approach

The study employs the Fixed Effects, and the IV2SLS for Panel Data approaches to estimate the indirect effects of the ECB's balance sheet size on the key macroeconomic growth rates for a set of 14 European countries during the 2009–2023 time period.

Findings

The findings suggest that the indirect effects of the ECB's balance sheet size on GDP and Industrial Production are highly statistically significant for peripheral countries while rather not for the core countries. However, although the ECB's UMP may influence the real GDP growth rate, there is no evidence to prove that they have an effect on the industrial production growth rates, regardless of the positive high statistically significant relationship between these two growth rates.

Practical implications

The findings have important implications for policymakers, as they provide valuable guidance for monetary policy formulation and for maintaining financial stability within the Eurozone.

Originality/value

This paper contributes to the understanding of how the transmission of UMP impacts economic growth through production stimulation in Europe.

Keywords: bond yields, unconventional monetary policy, sovereign bonds, government interventions