Strategic and Implementation Issues Regarding ECB Monetary Policy

Abstract

This paper identifies the impact of the most important ECB‟s non-standard monetary policy measures in the euro area. The global recession has been reflected in the slowdown of the U.S. economy and the largest economies of Europe and Asia. The 2008 and 2014 financial crisis hit the European financial system, whereas during 2010 and early 2011 Eurozone faced the hardest time in the so-called debt crisis coupled with a drop in market confidence. Financial markets faced some problems of solvency of countries with higher debt and fiscal deficits, such as the sovereign debt crisis bubbles in Spain and Italy. The European Central Bank reacted by imposing strategic and technical measures to fuel the banks' liquidity needs, to fight a risky credit crisis and to restore investor‟s confidence within a heterogeneous Eurozone countries environment. The ECB implemented the unconventional measures, which aimed at lowering and flattening the yield curve by reducing the interest rate level and shrinking the gap between long- and short-term interest rates. The study can be applied to improve the monetary policy measures and reduce risks in the financial sector. The questions, which need to be addressed, relate to whether unconventional monetary policy works and what are the challenges in the long run.