Talking fragmentation away – Decoding the ’whatever it takes’ effect

Martin Baumgärtner and Johannes Zahner

Economics Letters, 2024, vol. 234, issue C

Abstract: In 2022, the ECB introduced a new instrument designed to combat fragmentation in euro area government bond yields. To assess the ECB’s effectiveness in addressing fragmentation through existing instruments, particularly communication, we turn to a pivotal historical event – Mario Draghi’s famous “whatever it takes” speech. Widely interpreted as a commitment by the ECB to act as a lender of last resort, this speech eased tensions in bond markets. Employing state-of-the-art computational linguistics, we create an index that quantifies the ECB’s commitment to act as a lender of last resort based on this historic speech. Our index highlights the ECB’s central role in stabilizing financial markets, especially during periods of heightened uncertainty.

Keywords: Natural language processing; Embedding; Central bank communication; Transfer learning; Fragmentation; Financial stability (search for similar items in EconPapers)
JEL-codes: C45 E52 Z13 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176523005104
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:234:y:2024:i:c:s0165176523005104

DOI: 10.1016/j.econlet.2023.111484

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().