We assess the yield impact of asset purchases within the European Central Bank׳s (ECB) Securities Markets Programme (SMP) in five euro area sovereign bond markets from 2010–11. In addition to large ...announcement effects, we find an impact of approximately −3 basis points at the five-year maturity for purchases of 1/1000 of the outstanding debt. Bond yield volatility and tail risk are lower on intervention days for most SMP countries. A dynamic specification points to both transitory and long-run effects. Purchases improved liquidity conditions and reduced default-risk premia, while the signaling of future low interest rates did not play a role.
Who Borrows from the Lender of Last Resort? DRECHSLER, ITAMAR; DRECHSEL, THOMAS; MARQUES-IBANEZ, DAVID ...
The Journal of finance (New York),
October 2016, Letnik:
71, Številka:
5
Journal Article
Recenzirano
We analyze lender of last resort (LOLR) lending during the European sovereign debt crisis. Using a novel data set on all central bank lending and collateral, we show that weakly capitalized banks ...took out more LOLR loans and used riskier collateral than strongly capitalized banks. We also find that weakly capitalized banks used LOLR loans to buy risky assets such as distressed sovereign debt. This resulted in a reallocation of risky assets from strongly to weakly capitalized banks. Our findings cannot be explained by classical LOLR theory. Rather, they point to risk taking by banks, both independently and with the encouragement of governments, and highlight the benefit of unifying LOLR lending and bank supervision.
The economic effects of the Covid-19 pandemic have placed a renewed strain on the economic governance of the European Union (EU). The European Central Bank (ECB) was a key player in the EU's response ...to the crisis induced by the pandemic. This paper adopts a theoretical approach focused on policy learning to explain how and why the ECB responded to the crisis in 2020-2021. By drawing on speeches, newspaper articles and interviews with policy-makers, the paper finds that the ECB was able to rely on earlier crisis experiences in the euro area in forming its response to the pandemic crisis. Although the sovereign debt crisis and the pandemic crisis had both similarities and differences from one another, the ECB was able to engage in inter-crisis and intra-crisis learning. Its learning concerned objectives, instruments as well as an awareness that timely and forceful response was crucial, so that the member states and other EU institutions had time to act.
Abstract
We investigate whether monetary policy announcements affect firms' and consumers' expectations by considering their media treatment. We initially use standard monetary policy surprise ...measures and analyze how the main general newspapers in France report on the announcements. Eighty‐five percent of the monetary policy surprises are either not associated with the newspapers reporting a change in the monetary policy stance or have a sign inconsistent with the media report. Only when we consider media‐consistent monetary policy surprises do we find that consumers and firms respond to monetary policy announcements. The economic tonality of the media reports drives the sign of consumers' response.
The aim of the undertaken research is an attempt to explain, on theoretical and empirical grounds, the interdependence between central bank communication, its transparency credibility ...and,consequently, the effectiveness of monetary policy pursued by central banks. The study used research methods based on the literature analysis on the subject in the field of banking and finance, as well as statistical and econometric methods (Granger causality analysis and the generalised linear model – GLM). Literature studies are aimed at answering the question of what is the relationship between the transparency, credibility of the central bank and the effectiveness of monetary policy in theoretical terms. However, the empirical research studies aim to confirm the hypothesis (H0) or reject the hypothesis (H1) about the causal relationships between the variables mentioned. Empirical analyses were conducted on the example of the European Central Bank, which, from the point of view of its monetary policy, is characterised by relatively high efficiency, relatively effectively stabilising inflation in the monetary union. All statistics used in the study were taken from databases of the International Monetary Fund (IMF World Economic Outlook), the European Union statistical office (Eurostat) and the Organisation for Economic Cooperation and Development (OECD) (OECD Data). The analysis covers the period from 2010 to 2022 based on monthly data. The results of the research confirmed the existence of the null hypothesis (i.e., the significant impact of communication, transparency and credibility of the European Central Bank on the effectiveness of monetary policy in the Euro area). The results of the conducted research may be a starting point for further, more in-depth research on the relationship between communication, transparency, credibility and effectiveness of central banks in countries with different levels of economic development.
This article examines the ways in which EU actors have engaged in incremental changes to the eurozone rules 'by stealth' ‒ that is, by reinterpreting the rules and recalibrating the numbers without ...admitting it in their public discourse. Using the methodological framework of discursive institutionalism to focus on agents' ideas and discursive interactions in institutional context, the article links EU actors' reinterpretation of rules to their efforts to ensure greater legitimacy in terms of policy performance and governance processes as well as citizen politics. Using the normative theoretical framework of EU democratic systems theory, it analyses EU actors' considerations of legitimacy not only in terms of their policies' 'output' performance and citizens' political 'input' but also the 'throughput' quality of their governance processes. The article illustrates this by elaborating on the different pathways to legitimation of the European Central Bank and the European Commission.
This article assesses the impact of Quantitative Easing and other unconventional monetary policies followed by central banks in the wake of the financial crisis that began in 2007. We consider the ...implications of theoretical models for the effectiveness of asset purchases and look at the evidence from a range of empirical studies. We also provide an overview of the contributions of the other articles in this Feature.
Eurosystem macroprudential policies require shared action between national authorities and the European Central Bank (ECB). This has created the need for a common basis for macroprudential analysis ...and as result the Macroprudential Database (MPDB) was created by the ECB and the European Systemic Risk Board (ESRB) in 2015 in order to support the central bank's functions and ESRB's needs. This paper examines a multivariate binary logit Early Warning Model (EWM) for systemic banking crises with the aim to evaluate the predictive validity of the risk indicators included in the MPDB, as well as further variables not employed in previous relevant studies. The main finding is that most of the risk indicators employed from MPDB are important for forecasting from 4 to 1 years before the onset of a systemic banking crisis. Specific banking variables that capture industry concentration, assets, funding, and liquidity, are more important, on average, than macroeconomic variables. Important financial stress indicators such as CLIFS and SovCISS and economic expectations are also significant. The model is robust to various specifications and has a better performance when post-crisis observations are not included.
The global financial crisis has transformed the relationship between the International Monetary Fund (IMF) and the European Union (EU). Until the crisis, the IMF had not lent to EU member states in ...decades, but now the two organisations closely coordinate their lending policies. In the Latvian and Romanian programmes, the IMF and the EU advocated different loan terms. Surprisingly, the EU embraced 'Washington Consensus'-style measures more willingly than did the IMF, which much of the contemporary literature still portrays as an across-the-board promoter of orthodox macroeconomic policies. We qualify this stereotypical characterisation by arguing from a constructivist perspective that the degree of an organisation's autonomy from its members depends on the interpretation of its mandate. IMF staff viewed the Fund's technical mandate as an opportunity to react rather flexibly to the challenges of the latest crisis. By contrast, European Commission, as well as European Central Bank (ECB), staff interpreted the vast body of supranational rules as necessitating stricter adherence to economic orthodoxy. Thus, IMF lending policies were more flexible and, at least on fiscal issues, also less contractionary.
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