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The Financial and Macroeconomic Effects of SMP, LTRO and OMT Announcements

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  • Gifuni, Luigi

Abstract

The term Non-Conventional Monetary Policies refers to the Central Banks and indicates the possibility that they may implement policies of extraordinary nature. The motivation behind such a move may lie in the fact that conventional policies have temporarily lost their effectiveness. The events of the financial crisis of 2007 – 2009 are a good example to explain the use of an unconventional approach by the Central Banks. Previously, the monetary policies of many countries seemed to follow the Taylor rule, according to which the Central Banks (in reference to an inflation target) varied the nominal interest rate in response to changes in inflation and GDP. The financial crisis of 2007 has led the Monetary Authorities of the major countries to no longer consider the conventional criteria on which they had always based their interventions, pushing them towards these exceptional measures. This study evaluates the macroeconomic effects of three different Non-Conventional Monetary Policies in the financial and bond markets. Securities Market Programme (SMP), Long Term Refinancing Operation (LTRO) and Outright Monetary Transaction (OMT) represent the announcements of the European Central Bank (ECB) that have been evaluated. This paper will argue that the markets examined (France, Germany, Spain and Italy) have shown significant growth in terms of real activity, credit and prices, for the SMP and OMT announcement, whereas LTRO has displayed relatively muted results.

Suggested Citation

  • Gifuni, Luigi, 2017. "The Financial and Macroeconomic Effects of SMP, LTRO and OMT Announcements," MPRA Paper 90166, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:90166
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    References listed on IDEAS

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    1. 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.
    2. Marco Casiraghi & Eugenio Gaiotti & Lisa Rodano & Alessandro Secchi, 2013. "The impact of unconventional monetary policy on the Italian economy during the sovereign debt crisis," Questioni di Economia e Finanza (Occasional Papers) 203, Bank of Italy, Economic Research and International Relations Area.
    3. Gert Peersman, 2011. "Macroeconomic Effects of Unconventional Monetary Policy in the Euro Area," CESifo Working Paper Series 3589, CESifo.
    4. Christiane Baumeister & Luca Benati, 2013. "Unconventional Monetary Policy and the Great Recession: Estimating the Macroeconomic Effects of a Spread Compression at the Zero Lower Bound," International Journal of Central Banking, International Journal of Central Banking, vol. 9(2), pages 165-212, June.
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    Keywords

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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • 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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