The role of ECB monetary policy and financial stress on Eurozone sovereign yields

Christophe Blot, Jerome Creel, Paul Hubert and Fabien Labondance
Additional contact information
Christophe Blot: Sciences Po – OFCE & EconomiX – Université Paris Nanterre

Empirical Economics, 2020, vol. 59, issue 3, No 7, 1189-1211

Abstract: Abstract We investigate the role of both ECB’s asset purchases and financial stress during the Eurozone sovereign debt crisis. We explain the evolution of long-term interest rates for the euro area as a whole and for some Member States since the ECB started to purchase securities for monetary policy purposes. We address the potential endogeneity between unconventional monetary policies and financial stress, and control for four categories of fundamentals: macroeconomic, international, financial and expectations. We find that expansionary unconventional monetary shocks have reduced the level of sovereign yields, whereas exogenous shocks to financial stress have had no effect. This result is robust to an ARCH representation, to a longer sample and to a panel estimation. In addition, we show that country-specific financial stress has had a positive impact on the change in sovereign yields, while unconventional monetary shocks have had a negative effect. Our results suggest that ECB’s unconventional policies have been effective in mitigating sovereign risks across the different Eurozone countries.

Keywords: Asset purchase programmes; ECB; Sovereign yields; Monetary policy; CISS; European sovereign debt crisis (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://link.springer.com/10.1007/s00181-019-01717-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: The role of ECB monetary policy and financial stress on Eurozone sovereign yields (2020)
Working Paper: The role of ECB monetary policy and financial stress on Eurozone sovereign yields (2019)
Working Paper: The role of ECB monetary policy and financial stress on Eurozone sovereign yields (2019)
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:spr:empeco:v:59:y:2020:i:3:d:10.1007_s00181-019-01717-1

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-019-01717-1

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().