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The ECB Unconventional Monetary Policies: Have They Lowered Market Borrowing Costs for Banks and Governments?

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  • Urszula Szczerbowicz

Abstract

This paper evaluates the impact of all ECB unconventional monetary policies implemented between 2007 and 2012 on bank and government borrowing costs. We employ event-based regressions to measure the effect of each policy. The borrowing conditions for banks are represented by money market spreads and covered bond spreads while the sovereign bond spreads reflect government borrowing costs. The results show that sovereign bond purchasing programs (SMP, OMT) proved to be the most effective in lowering longer-term borrowing costs for both banks and governments with the largest impact in periphery euroarea countries. The strong impact in the euro-area periphery suggests that the central bank intervention in sovereign market is particularly effective when the sovereign risk is important. Furthermore, both covered bond purchase programs and 3-year loans to banks reduced bank refinancing costs.

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Paper provided by CEPII research center in its series Working Papers with number 2012-36.

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Date of creation: Dec 2012
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Handle: RePEc:cii:cepidt:2012-36

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Keywords: unconventional monetary policy; quantitative easing; credit easing; sovereign bond spreads; covered bond spreads; Euribor-OIS spread;

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References

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Cited by:
  1. Richhild Moessner, 2014. "Effects of ECB balance sheet policy announcements on inflation expectations," DNB Working Papers 416, Netherlands Central Bank, Research Department.
  2. G. Peersman, 2014. "The Effectiveness of Unconventional Monetary Policies," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 14/875, Ghent University, Faculty of Economics and Business Administration.

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