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Announcements of ECB Unconventional Programs: Implications for the Sovereign Risk of Italy

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  • Matteo Falagiarda
  • Stefan Reitz

Abstract

This paper studies the effects of ECB communications about unconventional monetary policy operations on the perceived sovereign risk of Italy over the last five years. More than fifty events concerning non-standard operations are identified and classified with respect to the specific ECB program. The empirical results are derived from both an event-study analysis and a GARCH framework, which uses Italian long-term bond futures to disentangle expected from unexpected policy actions. We find that the ECB announcements about unconventional monetary policies substantially reduced Italian long-term government bond yield spread relative to German counterparts. Particularly, among the different types of measures, news about the Securities Markets Programme and the Outright Monetary Transactions are found to be effective in affecting the perceived sovereign risk of Italy

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File URL: https://www.ifw-members.ifw-kiel.de/publications/announcements-of-exb-unconventional-programs-implications-for-the-sovereign-risk-of-italy/KWP_1866.pdf
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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1866.

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Length: 34 pages
Date of creation: Aug 2013
Date of revision:
Handle: RePEc:kie:kieliw:1866

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Keywords: central bank communications; unconventional monetary policy; European sovereign debt crisis; event-study; GARCH models;

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References

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Citations

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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. Carlo Altavilla & Domenico Giannone & Michele Lenza, 2014. "The Financial and Macroeconomic Effects of the OMT Announcements," CSEF Working Papers 352, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  3. Urszula Szczerbowicz, 2012. "The ECB Unconventional Monetary Policies: Have They Lowered Market Borrowing Costs for Banks and Governments?," Working Papers 2012-36, CEPII research center.
  4. Fuertes, Ana-Maria & Kalotychou, Elena & Saka, Orkun, 2014. "ECB Policy and Eurozone Fragility: Was De Grauwe Right?," CEPS Papers 9414, Centre for European Policy Studies.
  5. Ansgar Belke, 2013. "Non-Standard Monetary Policy Measures – Magic Wand or Tiger by the Tail?," Ruhr Economic Papers 0447, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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