The Sound of Economics

Quantitative tightening in the euro area

Mar 29, 2023

41:45

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Episode notes

Introduction

2min

Quantitative Tightening in the Broader Monetary Policy Framework

2min

The Reversal of QE

2min

The Signaling Effect of QE

5min

The Economic Case for Doing QT

2min

The Importance of QT in Europe

3min

The Risks of QE

2min

The Risks of QE

5min

The Importance of QE in a Crisis

4min

10.

The Risk of Financial Fragmentation in the Eurozone

2min

11.

The Fed and the ECB Should Continue to Hike Rates

4min

12.

The Trade-Off Between Monetary and Financial Stability

5min

13.

The Fed's Liquidity Tool for Silicon Valley Bank

3min

14.

The Importance of Monitoring Financial Stability Issues

2min

In March 2023, the European Central Bank (ECB) launched its quantitative tightening (QT) policy, to unwind its portfolio of assets that resulted from its quantitative easing (QE) policy of the last decade.

Despite the scarce evidence on the effects of QT, it was never attempted in the Euro area. Most lessons can only be drawn from the 2017-19 experience in the United States.

In this episode of The Sound of Economics, Maria Demertzis invites Grégory Claeys and Megan Greene to discuss why the ECB has decided to go down the route of quantitative tightening and what it could mean for the future of the euro area.

Relevant publication:
Finding the right balance (sheet): quantitative tightening in the euro area, report by Grégory Claeys, requested by the ECON Committee, European Parliament