The ECB's asset purchase programme: A model-based evaluation

- I use a DSGE model to assess the ECB's recent asset purchase programme.
- The macroeconomic effects are potentially important when the programme is associated with forward guidance.
- The signalling that the future monetary policy stance will remain accommodative is the prominent transmission channel.

This paper uses a dynamic stochastic general equilibrium model with financial frictions to quantify the effects of the European Central Bank's recent asset purchase programme. Our results suggest that the macroeconomic effects of purchases are potentially important when the programme is associated with forward guidance on the interest rate. The signalling that the future monetary policy stance will remain accommodative is the prominent transmission channel.