The impact of ECB policies on Euro area investment

Christophe Blot (1) , Jérôme Creel (1) , Paul Hubert (1) , Fabien Labondance (1)

1 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

We analyze the reasons for which the very accommodative policy led by the ECB has not triggered a rebound of investment. After examining the evolutions of investment in the euro area, we observe a large heterogeneity both across sectors and countries. Consequently, it is questionable that the ECB’s monetary policy can increase investment in the whole area. Therefore, we study the extent to which monetary policy impacts investment. We use a counterfactual analysis and compute the level of investment had the ECB’s decisions been different. We observe the importance of the ECB in support to investment. Indeed, the investment in the euro area would have sunk without accommodative – first conventional, then unconventional – monetary policy. Finally, we lay the emphasis on the role of credit demand as one of the main determinants of investment since the 2008 crisis, which has depended among others on the impact of deleveraging and fiscal consolidation.

Domaines: Economies et finances

Christophe Blot, Jérôme Creel, Paul Hubert, Fabien Labondance. The impact of ECB policies on Euro area investment. [Research Report] Parlement européen. 2016. ⟨hal-03459319⟩