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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

    (CEPII)

Abstract

This paper evaluates the impact of the ECB’s unconventional policies on bank and government borrowing costs. We employ event-based regressions to assess and compare the effects of asset purchases and exceptional liquidity announcements on money markets, covered bond markets, and sovereign bond markets. The results show that (i) exceptional liquidity measures (three-year loans to banks and setting the ECB deposit rate to zero) significantly reduced persistent moneymarket tensions and that (ii) asset purchases were the most effective in lowering refinancing costs of banks and governments in the presence of high sovereign risk. Moreover, we show that the ECB asset purchases fed through into other asset prices: bank covered bond purchases diminished sovereign spreads, while sovereign bond purchases reduced covered bond spreads.

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  • Urszula Szczerbowicz, 2015. "The ECB Unconventional Monetary Policies: Have They Lowered Market Borrowing Costs for Banks and Governments?," International Journal of Central Banking, International Journal of Central Banking, vol. 11(4), pages 91-127, December.
  • Handle: RePEc:ijc:ijcjou:y:2015:q:5:a:3
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    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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

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