The Strategist

ECB finds out banks and economists are disappointed in QE

04/28/2017 - 14:22

The European Central Bank (ECB) published a survey of 95 central banks over 100 leading academic macroeconomists. The paper is dedicated to changing the policy of central banks following the crisis. The most interesting moment is the respondents’ attitude towards the idea of quantitative easing (QE). The central banks’ managers tend to doubt the QE’s effectiveness, and about 20% of them believe that this group of tools will no longer be involved. Economists, on the contrary, stick to the theory.

Jason Rogers via flickr
Jason Rogers via flickr
The ECB survey was conducted in two waves, in February and May 2016, by e-mail. Uniqueness of this work, recently published in the ECB’s Working Papers, lies in status of the interviewers and respondents, as well as in the questionnaire’s details and specific "sensitivity" of questions asked by independent analysts. Despite assurances of anonymity, fear of compromising the information resulted in responses from just 58% of the respondents. It may look paradoxical, but academic economists were the most suspicious: the ECB received responses from less than 40% of more than 400 questionnaires sent to representatives of research programs CERP and NBER.

A year-long lag between collection of the questionnaires and publication, apparently, was one of the conditions for publishing the survey’s results. The ECB’s questions were related to personal opinion of economists of central banks and universities on changes in the central banks’ practice following the current financial crisis. In particular, the ECB researchers were interested in their opinion on how roles central banks changed in the crisis of 2008-2009 and subsequent years of instability. Thus, answers to a question about whether the situation with the central banks’ independence has changed after the crisis are indicative. 79.6% of the central banks’ managers said that there was no increase or decrease in the degree of independence, 1.9% said they lost "little" or "quite a lot" of independence, 15% stated that now they can act more independently (3.7% preferred the answer "hard to say"). At that, economists are much more confident that central banks in their countries managed to stay independent. 40.5% of respondents answered that the independence has been "lost a little", and 43% are in solidarity with most of their colleagues from central banks.

A number of the ECB’s question concerned "non-standard" options for monetary policy and a post-crisis view of their effectiveness. Apparently, the most important in the ECB’s paper are responses of the central bankers to the question of whether there will be different variants of QE, assets buyout on the open market, or alterations in instruments of monetary regulators after the crisis of 2008-2009 and later. Only 35% of the surveyed managers believe that the "quantitative easing" in the form of government debt repayment remains a working tool in any case, 5.9% believe that QE is a good idea, but has to be "modified", and 20.6% of this group directly said that this tool will no longer be used due to its ineffectiveness. 38.2% say that it is too early to make a judgment about the QE’s effectiveness. These answers are in stark contrast to opinion of the academic economists - 68.2% of them are sure that the central bank should use QE further, 10.8% are for its modified form, 17.8% - for refusal. Only 3.2% of the academic macroeconomists say that it is "too early to judge". 29% of central bank management and 52% of economists are willing to keep non-standard forms of QE, outside of redemption, while a third of both groups is confident that this kind of QE does not work at all. 


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