Monetary Policy Normalization of the European Central Bank

Monetary policy normalization of modern central banks is the process of ending non-standard monetary policy initiatives and its return to the pre-global financial crisis framework. On the other hand, it may mean a transformation of monetary policy towards a new quality, a new monetary architecture, hitherto unknown to central banks - referred as "new normal". The lack of previous experience of central banks in implementation of normalizing activities is undoubtedly a factor hindering their realization. Literature studies indicate a small number of scientific studies and publications in this research area. Therefore, appropriate definition and implementation of the exit strategies' assumptions is extremely difficult in the lack of theoretical framework. In turn, normalization without clearly formulated assumptions, implemented ad hoc, may destabilize banking sector, and finally the whole financial system. Detailed guidelines are also crucial for the effectiveness of the process. Appropriate identification of the normalization process, undertaken early enough - even during unconventional policy, will avoid the negative effects of the "exit" and support positive results, generated during the implementation of non-standard monetary policy. The main aim of the study is identification of possibilities of monetary policy normalization of the European Central Bank. The central bank of the Eurozone still implements extraordinary instruments (enter strategy) - in the form of quantitative easing and zero interest rate policy, while the major central banks of the global economy have developed detailed exit strategies assumptions. Thus, the article attempts to specify detailed guidelines of the ECB normalization process, paying particular attention to balance sheet normalization.