The Relationship between Unconventional Monetary Policy and Uncertainty at the Zero Lower Bound in the EMU: Evidence from a SVAR Methodology

The main refinancing operations rate has been stuck at the zero lower bound for more thanthree years and the European Central Bank has engaged in unconventional monetary pol-icy to provide stimulus to the economy. Using structural vector autoregressive models, thisthesis addresses the question whether the unconventional monetary policies in the EuropeanEconomic and Monetary Union (EMU) between 2007 and 2019 affected stock market un-certainty. A loosening monetary policy, measured by target balances, decreases uncertaintywithin the EMU. This reaction is found to be more pronounced among southern Europeancountries than among the non peripheral countries. Further, I provide evidence for a signifi-cant drop in uncertainty in Italy, Portugal, and Spain considering the launch of the outrightmonetary transactions Program (OMT) and the Securities Markets Program (SMP).