An Inquiry into the Effects of Quantitative Easing in the European Union

This paper estimates the effect of the newly introduced quantitative easing policy by the ECB. The effects are measured by introducing an expansionary shock to the ECB’s balance sheet in an unrestricted VAR model with the use of impulse response functions. The effects of the low oil prices and pre-crisis data are, furthermore, included. The findings suggest that an expansionary shock will increase inflation, but also has a negative effect on output. In addition, an increase in the oil prices will increase the inflation rate, but has an negative effect on output after a period of twelve months.