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The response of euro area sovereign spreads to the ECB unconventional monetary policies. National Bank of Belgium Working Paper No. 309

Dewachter, Hans and Iania, Leonardo and Wijnandts, Jean-Charles (2016) The response of euro area sovereign spreads to the ECB unconventional monetary policies. National Bank of Belgium Working Paper No. 309. [Working Paper]

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    Abstract

    We analyse variations in sovereign bond yields and spreads following unconventional monetary policy announcements by the European Central Bank. Using a two-country, arbitrage-free, shadow-rate dynamic 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 reduced both the average expected instantaneous spread and risk repricing 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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    Item Type: Working Paper
    Subjects for non-EU documents: EU policies and themes > EU institutions & developments > European Central Bank
    Countries > Belgium
    Countries > France
    Countries > Italy
    Countries > Spain
    EU policies and themes > Policies & related activities > economic and financial affairs > EMU/EMS/euro
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > National Bank of Belgium (Brussels) > Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 09 Sep 2019 11:29
    Number of Pages: 56
    Last Modified: 09 Sep 2019 11:29
    URI: http://aei.pitt.edu/id/eprint/97450

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