Effectiveness and transmission of the ECB's balance sheet policies

We estimate the effects of exogenous innovations to the balance sheet of the ECB since the start of the financial crisis within a structural VAR framework. An expansionary balance sheet shock stimulates bank lending, stabilizes financial markets, and has a positive impact on economic activity and prices. The effects on bank lending and output turn out to be smaller in the member countries that have been more affected by the financial crisis, in particular those countries where the banking system is less well-capitalized.