UNCONVENTIONAL MONETARY MEASURES – THE CASE OF THE EUROZONE AND THE ECB

Abstract

Up until the 90s, the central banks weren’t familiar with the so-called “unconventional measures”. The standard monetary framework has been fundamentally changed by the BOJ (Bank of Japan) at the beginning of the 21st Century and shortly after that – The Federal Reserve System. The main objective of the theoretical approach of this paper is to uncover the unconventional monetary framework used by the European Central Bank during the Great Recession and briefly sharing light on the measures used during the COVID-19 pandemic. The research was conducted by analyzing the key moments of ECB’s monetary shift according to their assessed and forecasted economic development. This paper focuses on the effectiveness of the unconventional measures, especially about stabilizing financial markets and restoring the functional transmission mechanism by the SMP (Securities Markets Programme) and APP (Asset Purchase Programme) as well as stimulating economic growth and fulfilling ECB’s main objective – price stability.This research notes that the usage of unconventional policies has given the right results especially in lowering the divergence of long-term government securities yields as well as escaping the deflationary trap.