May 19, 2017 / 11:22 AM / 6 months ago

How much does ECB policy add to euro zone growth?

LONDON (Reuters) - The European Commission has sought to explain what lies behind its projection of 1.7 percent economic growth in the euro zone this year -- with surprisingly little credit given to European Central Bank monetary policy.

Benoit Coeure, board member of the European Central Bank (ECB), is photographed during an interview with Reuters journalists at the ECB headquarters in Frankfurt, Germany, May 17, 2017. REUTERS/Kai Pfaffenbach

As the following graphic on the Commission’s website shows, monetary policy is said to add just 0.1 percent to the growth total -- not much given a raft of negligible and even negative interest rates plus monthly asset purchases of 60 billion euros (£51.5 billion) a month.


To be fair, it a case of definitions. As Commission notes linked to the website state, the impact of “unconventional monetary policy” -- the asset-buying quantitative easing -- are not captured in the data.

Similarly, it says ECB monetary policy clearly plays into other listed contributors to growth, including the biggest, the 1.3 percent assigned to “productivity developments”.

As ECB board member Benoit Coeure told Reuters this week: “Our models show that around half of the recovery since the crisis can be attributed to monetary policy.”

Additional reporting by Balazs Koranyi; Editing by Toby Chopra

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