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The Financial and Macroeconomic Effects of the OMT Announcements

  • 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)

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.

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Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 352.

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Date of creation: 14 Jan 2014
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Handle: RePEc:sef:csefwp:352
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  1. Banbura, Marta & Giannone, Domenico & Lenza, Michele, 2014. "Conditional forecasts and scenario analysis with vector autoregressions for large cross-sections," CEPR Discussion Papers 9931, C.E.P.R. Discussion Papers.
  2. Domenico Giannone & Michèle Lenza & Huw Pill & Lucrezia Reichlin, 2010. "Non‐Standard Monetary Policy Measures," Working Papers ECARES ECARES 2010-040, ULB -- Universite Libre de Bruxelles.
  3. De Mol, Christine & Giannone, Domenico & Reichlin, Lucrezia, 2006. "Forecasting Using a Large Number of Predictors: Is Bayesian Regression a Valid Alternative to Principal Components?," CEPR Discussion Papers 5829, C.E.P.R. Discussion Papers.
  4. Marta Bańbura, 2008. "Large Bayesian VARs," 2008 Meeting Papers 334, Society for Economic Dynamics.
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  6. Carlo Altavilla & Domenico Giannone, 2014. "The effectiveness of non-standard monetary policy measures: evidence from survey data," Working Papers CASMEF 1406, Dipartimento di Economia e Finanza, LUISS Guido Carli.
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  9. Giannone, Domenico & Lenza, Michele & Reichlin, Lucrezia, 2012. "Money, credit, monetary policy and the business cycle in the euro area," CEPR Discussion Papers 8944, C.E.P.R. Discussion Papers.
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  12. Michael A. S. Joyce & Ana Lasaosa & Ibrahim Stevens & Matthew Tong, 2011. "The Financial Market Impact of Quantitative Easing in the United Kingdom," International Journal of Central Banking, International Journal of Central Banking, vol. 7(3), pages 113-161, September.
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  14. Urszula Szczerbowicz, 2012. "The ECB Unconventional Monetary Policies: Have They Lowered Market Borrowing Costs for Banks and Governments?," Working Papers 2012-36, CEPII research center.
  15. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," NBER Working Papers 17555, National Bureau of Economic Research, Inc.
  16. Alistair Dieppe & Alberto González Pandiella & Stephen Hall & Alpo Willman, 2011. "The ECB's New Multi-Country Model for the Euro area: NMCM - with Boundedly Rational Learning Expectations," Discussion Papers in Economics 11/27, Department of Economics, University of Leicester.
  17. Matteo Falagiarda & Stefan Reitz, 2013. "Announcements of ECB Unconventional Programs: Implications for the Sovereign Risk of Italy," Kiel Working Papers 1866, Kiel Institute for the World Economy.
  18. Ghysels, Eric & Idier, Julien & Manganelli, Simone & Vergote, Olivier, 2014. "A high frequency assessment of the ECB securities markets programme," Working Paper Series 1642, European Central Bank.
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