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The Financial and Macroeconomic Effects of the OMT Announcements

Author

Listed:
  • Carlo Altavilla

    () (European Central Bank and CSEF)

  • Domenico Giannone

    () (Université Libre de Bruxelles and ECARES)

  • Michele Lenza

    () (European Central Bank, Université Libre de Bruxelles and ECARES)

Abstract

This paper evaluates the effects of the 2012 announcements of the ECB’s Outright Monetary Transactions (OMT) programme. Using high frequency data, we find that the OMT announcements decreased the Italian and Spanish two years government bond yields by about two percentage points, while leaving unchanged the bond yields of the same maturity in Germany and France. The results are robust to controlling for all other relevant macroeconomic and financial news released at the time of the announcements. These outcomes are used to calibrate scenarios in a multi-country model describing the macro-financial linkages in France, Germany, Italy and Spain. The scenario analysis suggests that the reduction in bond yields due to the OMT announcements will be associated to a significant increase in real activity, credit and prices in Italy and Spain.

Suggested Citation

  • Carlo Altavilla & Domenico Giannone & Michele Lenza, 2014. "The Financial and Macroeconomic Effects of the OMT Announcements," CSEF Working Papers 352, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:352
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Outright monetary transactions; event study; news; multi-country vector autoregressive model;

    JEL classification:

    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling

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