Euro Area monetary policy shocks: impact on financial asset prices during the crisis?

Caroline Jardet () and A. Monks

Working papers from Banque de France

Abstract: We use high-frequency intraday interest rate data to measure euro area monetary policy shocks on the days of ECB interest rate announcements between 2002 and 2013. In line with G rkaynak et al. (2005), we look at monetary policy shocks along two time dimensions: one related to the current level of short-term interest rates and a second related to expectations for the future path of these rates. We undertake regression analysis in order to determine the impact of monetary policy shocks on euro-denominated financial asset prices and confirm that shocks related to the future path of monetary policy are an important driver, particularly for longer-term bond yields. We find that this relationship has changed for certain asset classes since the onset of the crisis, notably the sovereign bonds of stressed euro area countries. These findings highlight the changed nature of the monetary policy transmission mechanism for some euro area countries during the sovereign debt crisis.

Keywords: Monetary policy; ECB; Transmission mechanism; financial crisis. (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 E61 E65 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2014
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:512

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