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Monetary policy, fragmentation risks and the euro
[Politique monétaire, risques de fragmentation et l’euro]

Author

Listed:
  • Klodiana Istrefi
  • Maria Sole Pagliari
  • Urszula Szczerbowicz

Abstract

The ECB’s monetary policy can affect the euro through sovereign spreads. A policy surprise that reduces sovereign spreads during the ECB press conference will lead to an appreciation of the euro. This relationship is generally observed when redenomination risk is high, suggesting that monetary policy counters fragmentation risks, thus supporting the solidity of the euro. La politique monétaire de la BCE peut influer sur l’euro via les spreads souverains. L’annonce d’une décision de politique monétaire induisant une réduction des spreads souverains durant la conférence de presse de la BCE entraîne une appréciation de l’euro. Cette relation s’observe généralement lorsque le risque de redénomination est élevé, suggérant que la politique monétaire limite le risque de fragmentation et renforce ainsi la solidité de l’euro.

Suggested Citation

  • Klodiana Istrefi & Maria Sole Pagliari & Urszula Szczerbowicz, 2021. "Monetary policy, fragmentation risks and the euro [Politique monétaire, risques de fragmentation et l’euro]," Eco Notepad (in progress) 237, Banque de France.
    • Handle: RePEc:bfr:econot:237
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