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An Event Study Analysis of ECB Unconventional Monetary Policy

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  • Giulia RIVOLTA

Abstract

This paper analyzes the impact of the unconventional monetary policy measures implemented by the European Central Bank since 2007 to cope with the financial and sovereign debt crisis. The focus is on government bond yields of 10 European countries and 6 extra-Euro countries to evaluate the monetary policy transmission mechanism. In particular, I evaluate the effects of monetary policy announcements and liquidity injections on the yield curve. The econometric tool applied is the event-study methodology on policy announcements and liquidity injections (longer-term refinancing operations). Results support the existence of an expectational channel of transmission and, more important, they shows that the effects of unconventional measures are not unique inside the monetary union but vary between countries and over time. In particular, the unfolding of the European sovereign debt crisis completely changed the impact of liquidity injections as they led to a rise in interest rate spreads for highly indebted countries.

Suggested Citation

  • Giulia RIVOLTA, 2014. "An Event Study Analysis of ECB Unconventional Monetary Policy," Departmental Working Papers 2014-02, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    • Handle: RePEc:mil:wpdepa:2014-02
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    Cited by:

    1. Klara Halova & Roman Horvath, 2015. "International Spillovers of ECB’s Unconventional Monetary Policy: The Effect on Central and Eastern Europe," Working Papers 351, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    2. Carlo Altavilla & Domenico Giannone & Michele Lenza, 2016. "The Financial and Macroeconomic Effects of the OMT Announcements," International Journal of Central Banking, International Journal of Central Banking, vol. 12(3), pages 29-57, September.
    3. Jäger, Jannik & Grigoriadis, Theocharis, 2016. "Soft budget constraints, European Central Banking and the financial crisis," Discussion Papers 2016/7, Free University Berlin, School of Business & Economics.
    4. Gibson, Heather D. & Hall, Stephen G. & Tavlas, George S., 2016. "The effectiveness of the ECB's asset purchase programs of 2009 to 2012," Journal of Macroeconomics, Elsevier, vol. 47(PA), pages 45-57.

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    More about this item

    Keywords

    central bank announcements; unconventional monetary policy; event-study; government bond yields; European sovereign debt crisis;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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