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Euro Area Sovereign Yields and the Power of Unconventional Monetary Policy

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  • Antonio Afonso

    () (ISEG/UL – Universidade de Lisboa, Portugal)

  • Mina Kazemi

    () (ISEG/UL – Universidade de Lisboa, Portugal)

Abstract

We assess the determinants of long-term sovereign yield spreads, vis-a-vis Germany, using a panel of 10 Euro area countries over the period 1999.01–2016.07 notably regarding the ECB’s conventional and unconventional monetary policies. Our findings indicate that the international risk, the bid-ask spread and real effective exchange rate increased the 10-year sovereign bond yield spreads, while sovereign ratings’ improvements decreased the spreads. Moreover, Longer-term Refinancing Operations and the Securities Market Program decreased the yield spreads. The overall announcements of the unconventional policies also significantly decreased the yield spreads, notably in the periphery countries.

Suggested Citation

  • Antonio Afonso & Mina Kazemi, 2018. "Euro Area Sovereign Yields and the Power of Unconventional Monetary Policy," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 68(2), pages 100-119, April.
  • Handle: RePEc:fau:fauart:v:68:y:2018:i:2:p:100-119
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    References listed on IDEAS

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    Cited by:

    1. António Afonso & Luís Gonçalves, 2018. "The Policy Mix in the US and EMU: Evidence from a SVAR Analysis," Working Papers REM 2018/28, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.

    More about this item

    Keywords

    sovereign bonds; non-conventional monetary policy; euro area; panel data;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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