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The impact of ECB crisis measures on euro-area CDS spreads

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  • Petra Gerlach-Kristen

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Abstract

This paper studies euro-area CDS spreads during the financial crisis with the aim of discovering which of the ECB’s open-market operations reduced bank and government spreads. After controlling for potential contagion across the financial system, it is found that effects vary across operations. Purchases under the Covered Bond Purchase Programme seem to have reduced spreads, as did the announcement of the Securities Market Programme. Actual SMP purchases, however, appear to have raised spreads, perhaps because markets took them as a sign of policymaker concern about the financial system. The same is true for the announcement of the 3-year repos. Copyright Swiss Society for Financial Market Research 2015

Suggested Citation

  • Petra Gerlach-Kristen, 2015. "The impact of ECB crisis measures on euro-area CDS spreads," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 29(2), pages 149-168, May.
  • Handle: RePEc:kap:fmktpm:v:29:y:2015:i:2:p:149-168
    DOI: 10.1007/s11408-015-0249-1
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    References listed on IDEAS

    as
    1. Heiko Hesse & Nathaniel Frank, 2009. "The Effectiveness of Central Bank Interventions During the First Phase of the Subprime Crisis," IMF Working Papers 09/206, International Monetary Fund.
    2. Gerlach, Petra, 2013. "Euro area CDS spreads in the crisis: The role of open market operations and contagion," Papers WP449, Economic and Social Research Institute (ESRI).
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    6. Andre Meier, 2009. "Panacea, Curse, or Nonevent? Unconventional Monetary Policy in the United Kingdom," IMF Working Papers 09/163, International Monetary Fund.
    7. 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.
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    9. Jack Meaning & Feng Zhu, 2011. "The impact of recent central bank asset purchase programmes," BIS Quarterly Review, Bank for International Settlements, December.
    10. Doran, David & Dunne, Peter & Monks, Allen & O'Reilly, Gerard, 2013. "Was the Securities Markets Programme Effective in Stabilizing Irish Sovereign Yields?," Research Technical Papers 07/RT/13, Central Bank of Ireland.
    11. Johannes C. Stroebel & John B. Taylor, 2009. "Estimated Impact of the Fed's Mortgage-Backed Securities Purchase Program," NBER Working Papers 15626, National Bureau of Economic Research, Inc.
    12. Joseph Gagnon & Matthew Raskin & Julie Remache & Brian Sack, 2011. "The Financial Market Effects of the Federal Reserve's Large-Scale Asset Purchases," International Journal of Central Banking, International Journal of Central Banking, vol. 7(1), pages 3-43, March.
    13. Eric Ghysels & Julien Idier & Simone Manganelli & Olivier Vergote, 2017. "A High-Frequency assessment of the ECB Securities Markets Programme," Journal of the European Economic Association, European Economic Association, vol. 15(1), pages 218-243.
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    15. Beirne, John & Dalitz, Lars & Ejsing, Jacob & Grothe, Magdalena & Manganelli, Simone & Monar, Fernando & Sahel, Benjamin & Sušec, Matjaž & Tapking, Jens & Vong, Tana, 2011. "The impact of the Eurosystem's covered bond purchase programme on the primary and secondary markets," Occasional Paper Series 122, European Central Bank.
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    Citations

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    Cited by:

    1. Richhild Moessner, 2018. "Effects of asset purchases and financial stability measures on term premia in the euro area," Applied Economics, Taylor & Francis Journals, vol. 50(43), pages 4617-4631, September.
    2. repec:eee:poleco:v:57:y:2019:i:c:p:3-21 is not listed on IDEAS
    3. repec:eee:quaeco:v:66:y:2017:i:c:p:314-327 is not listed on IDEAS
    4. Peter Schwendner & Martin Schuele & Thomas Ott & Martin Hillebrand, 2015. "European Government Bond Dynamics and Stability Policies: Taming Contagion Risks," Working Papers 8, European Stability Mechanism.

    More about this item

    Keywords

    CDS spreads; ECB; Sovereign debt crisis; Open-market operations; E52; E58; G01;

    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
    • G01 - Financial Economics - - General - - - Financial Crises

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