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The Effects of Macroeconomic, Fiscal and Monetary Policy Announcements on Sovereign Bond Spreads: An Event Study from the EMU

Antonio Afonso, Joao Jalles () and Mina Kazemi

No 2019/67, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: We assess the impact of announcements corresponding to different fiscal and monetary policy measures on the 10-year sovereign bond yield spreads (relative to Germany) of the 10 EMU countries during the period 01:1999 - 07:2016. Implementing pooled and country-fixed effects OLS regressions, we find that the European Commission’s (EC) releases of the excessive deficit procedure significantly affect the yield spreads. The EC releases of higher debt and better budget balance forecasts contribute to the rise and the decline of spreads, respectively. Moreover, we find that the announcements of the ECB’s key interest rates together with the longer-term refinancing operations (LTROs) and the first covered bond purchase programme (CBPP1) negatively affect sovereign yield spreads in our sample of EMU countries.

Keywords: sovereign yields; fiscal policy; monetary policy; event analysis; panel data (search for similar items in EconPapers)
JEL-codes: C23 E52 E62 G10 H63 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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Working Paper: The effects of macroeconomic, fiscal and monetary policy announcements on sovereign bond spreads: an event study from the EMU (2019) Downloads
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