Unconventional Monetary Policy in the Eurozone: A Lack of Forward Guidance?

Cécile Bastidon (), Nicolas Huchet () and Yusuf Kocoglu

Emerging Markets Finance and Trade, 2016, vol. 52, issue 1, 76-97

Abstract: From July to December 2011, the three-month EURIBOR-OIS and EURIBOR-Repo spreads quadrupled and reached 100 basis points due to a stabilization of the EURIBOR and a decrease in the overnight index swap (OIS) and Repo. Using a specific monetary policy announcements and financial indicators database, we find that the European Central Bank’s (ECB’s) unconventional measures did not systematically have a calming effect: Asset buyout announcements decreased market strains, whereas interest rates and liquidity provision announcements did not. Moreover, liquidity provision seems to have a stressing effect. Our findings are consistent with the theoretical underpinnings according to which forward guidance crucially determines the effectiveness of unconventional monetary policies.

Date: 2016
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Working Paper: Unconventional Monetary Policy in the Eurozone: A Lack of Forward Guidance? (2015)
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DOI: 10.1080/1540496X.2016.1105684

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