Munich Personal RePEc Archive

ECB policy consistency – loss of independence and the real estate bubble?

Rybacki, Jakub (2019): ECB policy consistency – loss of independence and the real estate bubble?

[img] PDF
MPRA_paper_95906.pdf

Download (430kB)

Abstract

During the period 2015-2018 European Central Bank (ECB) has implemented a large-scale asset purchases program in order to revive inflation expectations and achieve sustainable annual HICP dynamics close to 2%. Furthermore, bank communicated that policy should remain accommodative for a long time in the foreseeable future. Based on an extended Taylor rule with Wu-Xia shadow rates and variable Holston-Laubach-Williams natural rates we analyzed discretionary deviation in policy of ECB, US Federal Reserve (Fed) and Bank of England. We identified a widening dovish bias in ECB Governing Council policy during the years 2015-2019. Such policy resulted in increase of real estate prices and the risk of market bubble measured by the UBS index. The likely consequence of this problem is a decrease in public trust in central banks and increase of support for populist movements.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.