The response of Euro-area sovereign spreads to the ECB unconventional monetary policies

The response of Euro-area sovereign spreads to the ECB unconventional monetary policies 


Seminar of Leonardo Iania (UCL), 

On Wednesday, November 30, 2016 at 10:30AM (1701-N1)

 

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We analyse variations in sovereign bond yields and spreads follow- ing unconventional monetary policy announcements by the European Central Bank. Using a two-country, arbitrage-free, shadow-rate dy- namic term structure model (SR-DTSM), we decompose countries' yields into expectation and risk premium components. By means of an event study analysis, we show that the ECB's announcements re- duced both the average expected instantaneous spread and risk repric- ing components of Italian and Spanish spreads. For countries such as Belgium and France, the ECB announcements impacted primarily the risk repricing component of the spread.

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