Eurosystem crisis measures averted prolonged crisis: ECB paper

A European Central Bank (ECB) paper, published in January, said the Eurosystem's unconventional or non-standard monetary policy measures that were introduced during the onset of the recent financial crisis helped support monetary policy channels and prevent a reoccurrence of the Great Depression.

Domenico Giannone, Michele Lenza, Huw Pill and Lucrezia Reichlin, the paper's authors, use a Bayesian vector auto-regression model of the euro area to measure the effectiveness of the ECB's non-standard measures on the euro area monetary policy transmission mechanism following the collapse of Lehman Brothers in 2008. The authors refer to non-standard monetary policy measures introduced following the crisis to enhanced credit support to the financial system other than the standard interest rate tool.

Giannone, Lenza, Pill and Reichlin find the non-standard measures introduced by the ECB provided support to financial intermediation, credit expansion and economic activity in the euro area in the face of financial crisis. The results show that the non-standard measures supported the availability of monetary liquidity to the non-bank private sector and flow of bank loans to households and corporations.

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