Publicação
“Whatever it takes” to resolve the European sovereign debt crisis? Bond pricing regime switches and monetary policy effects
| Resumo: | This paper investigates the role of unconventional monetary policy as a source of timevariation in the relationship between sovereign bond yield spreads and their fundamental determinants. We use a two-step empirical approach. First, we apply a time-varying parameter panel modelling framework to determine shifts in the pricing regime characterising sovereign bond markets in the euro area over the period January 1999 to July 2016. Second, we estimate the impact of ECB policy interventions on the time-varying risk factor sensitivities of spreads. Our results provide evidence of a new bond-pricing regime following the announcement of the Outright Monetary Transactions (OMT) programme in August 2012. This regime is characterised by a weakened link between spreads and fundamentals, but with higher spreads relative to the pre-crisis period and residual redenomination risk. We also find that unconventional monetary policy measures affect the pricing of sovereign risk not only directly, but also indirectly through changes in banking risk. Overall, the actions of the ECB have operated as catalysts for reversing the dynamics of the European sovereign debt crisis. |
|---|---|
| Autores principais: | Afonso, António |
| Outros Autores: | Arghyrou, Michael G.; Gadea, María Dolores; Kontonikas, Alexandros |
| Assunto: | euro area spreads crisis time-varying relationship unconventional monetary policy |
| Ano: | 2017 |
| País: | Portugal |
| Tipo de documento: | working paper |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade de Lisboa |
| Idioma: | inglês |
| Origem: | Repositório da Universidade de Lisboa |
| _version_ | 1866810928715005952 |
|---|---|
| author | Afonso, António |
| author2 | Arghyrou, Michael G. Gadea, María Dolores Kontonikas, Alexandros |
| author2_role | author author author |
| author_facet | Afonso, António Arghyrou, Michael G. Gadea, María Dolores Kontonikas, Alexandros |
| author_role | author |
| contributor_name_str_mv | Repositório Científico de Acesso Aberto da ULisboa |
| country_str | PT |
| creators_json_txt | [{\"Person.name\":\"Afonso, António\"},{\"Person.name\":\"Arghyrou, Michael G.\"},{\"Person.name\":\"Gadea, María Dolores\"},{\"Person.name\":\"Kontonikas, Alexandros\"}] |
| datacite.contributors.contributor.contributorName.fl_str_mv | Repositório Científico de Acesso Aberto da ULisboa |
| datacite.creators.creator.creatorName.fl_str_mv | Afonso, António Arghyrou, Michael G. Gadea, María Dolores Kontonikas, Alexandros |
| datacite.date.Accepted.fl_str_mv | 2017-09-01T00:00:00Z |
| datacite.date.available.fl_str_mv | 2018-09-26T14:44:47Z |
| datacite.date.embargoed.fl_str_mv | 2018-09-26T14:44:47Z |
| datacite.rights.fl_str_mv | http://purl.org/coar/access_right/c_abf2 |
| datacite.subjects.subject.fl_str_mv | euro area spreads crisis time-varying relationship unconventional monetary policy |
| datacite.titles.title.fl_str_mv | “Whatever it takes” to resolve the European sovereign debt crisis? Bond pricing regime switches and monetary policy effects |
| dc.contributor.none.fl_str_mv | Repositório Científico de Acesso Aberto da ULisboa |
| dc.creator.none.fl_str_mv | Afonso, António Arghyrou, Michael G. Gadea, María Dolores Kontonikas, Alexandros |
| dc.date.Accepted.fl_str_mv | 2017-09-01T00:00:00Z |
| dc.date.available.fl_str_mv | 2018-09-26T14:44:47Z |
| dc.date.embargoed.fl_str_mv | 2018-09-26T14:44:47Z |
| dc.format.none.fl_str_mv | application/pdf |
| dc.identifier.none.fl_str_mv | http://hdl.handle.net/10400.5/15969 |
| dc.language.none.fl_str_mv | eng |
| dc.publisher.none.fl_str_mv | ISEG - REM - Research in Economics and Mathematics |
| dc.rights.none.fl_str_mv | http://purl.org/coar/access_right/c_abf2 |
| dc.subject.none.fl_str_mv | euro area spreads crisis time-varying relationship unconventional monetary policy |
| dc.title.fl_str_mv | “Whatever it takes” to resolve the European sovereign debt crisis? Bond pricing regime switches and monetary policy effects |
| dc.type.none.fl_str_mv | http://purl.org/coar/resource_type/c_8042 |
| description | This paper investigates the role of unconventional monetary policy as a source of timevariation in the relationship between sovereign bond yield spreads and their fundamental determinants. We use a two-step empirical approach. First, we apply a time-varying parameter panel modelling framework to determine shifts in the pricing regime characterising sovereign bond markets in the euro area over the period January 1999 to July 2016. Second, we estimate the impact of ECB policy interventions on the time-varying risk factor sensitivities of spreads. Our results provide evidence of a new bond-pricing regime following the announcement of the Outright Monetary Transactions (OMT) programme in August 2012. This regime is characterised by a weakened link between spreads and fundamentals, but with higher spreads relative to the pre-crisis period and residual redenomination risk. We also find that unconventional monetary policy measures affect the pricing of sovereign risk not only directly, but also indirectly through changes in banking risk. Overall, the actions of the ECB have operated as catalysts for reversing the dynamics of the European sovereign debt crisis. |
| dirty | 0 |
| eu_rights_str_mv | openAccess |
| format | workingPaper |
| fulltext.url.fl_str_mv | https://repositorio.ulisboa.pt/bitstreams/a0f57489-b890-4eb0-94ab-3c3849db175d/download |
| id | ul_0bb4c69c716be06840ec0a908dcc00a4 |
| identifier.url.fl_str_mv | http://hdl.handle.net/10400.5/15969 |
| instacron_str | ul |
| institution | Universidade de Lisboa |
| instname_str | Universidade de Lisboa |
| language | eng |
| network_acronym_str | ul |
| network_name_str | Repositório da Universidade de Lisboa |
| oai_identifier_str | oai:repositorio.ulisboa.pt:10400.5/15969 |
| organization_str_mv | urn:organizationAcronym:ul |
| person_str_mv | Afonso, António Arghyrou, Michael G. Gadea, María Dolores Kontonikas, Alexandros |
| publishDate | 2017 |
| publisher.none.fl_str_mv | ISEG - REM - Research in Economics and Mathematics |
| reponame_str | Repositório da Universidade de Lisboa |
| repository_id_str | urn:repositoryAcronym:ul |
| service_str_mv | urn:repositoryAcronym:ul |
| spelling | engISEG - REM - Research in Economics and Mathematicspt_PTThis paper investigates the role of unconventional monetary policy as a source of timevariation in the relationship between sovereign bond yield spreads and their fundamental determinants. We use a two-step empirical approach. First, we apply a time-varying parameter panel modelling framework to determine shifts in the pricing regime characterising sovereign bond markets in the euro area over the period January 1999 to July 2016. Second, we estimate the impact of ECB policy interventions on the time-varying risk factor sensitivities of spreads. Our results provide evidence of a new bond-pricing regime following the announcement of the Outright Monetary Transactions (OMT) programme in August 2012. This regime is characterised by a weakened link between spreads and fundamentals, but with higher spreads relative to the pre-crisis period and residual redenomination risk. We also find that unconventional monetary policy measures affect the pricing of sovereign risk not only directly, but also indirectly through changes in banking risk. Overall, the actions of the ECB have operated as catalysts for reversing the dynamics of the European sovereign debt crisis.application/pdfpt_PT“Whatever it takes” to resolve the European sovereign debt crisis? Bond pricing regime switches and monetary policy effectsAfonso, AntónioArghyrou, Michael G.Gadea, María DoloresKontonikas, AlexandrosHostingInstitutionOrganizationalRepositório Científico de Acesso Aberto da ULisboae-mailmailto:repositorio@reitoria.ulisboa.ptrepositorio@reitoria.ulisboa.ptISSNIsPartOf2184-108X2018-09-26T14:44:47Z2017-092017-09-01T00:00:00ZHandlehttp://hdl.handle.net/10400.5/15969http://purl.org/coar/access_right/c_abf2open accesseuro areaspreadscrisistime-varying relationshipunconventional monetary policy981056 bytesother research producthttp://purl.org/coar/resource_type/c_8042working paperhttp://purl.org/coar/access_right/c_abf2application/pdffulltexthttps://repositorio.ulisboa.pt/bitstreams/a0f57489-b890-4eb0-94ab-3c3849db175d/download |
| spellingShingle | “Whatever it takes” to resolve the European sovereign debt crisis? Bond pricing regime switches and monetary policy effects Afonso, António euro area spreads crisis time-varying relationship unconventional monetary policy |
| status | SINGLETON |
| subject.fl_str_mv | euro area spreads crisis time-varying relationship unconventional monetary policy |
| title | “Whatever it takes” to resolve the European sovereign debt crisis? Bond pricing regime switches and monetary policy effects |
| title_full | “Whatever it takes” to resolve the European sovereign debt crisis? Bond pricing regime switches and monetary policy effects |
| title_fullStr | “Whatever it takes” to resolve the European sovereign debt crisis? Bond pricing regime switches and monetary policy effects |
| title_full_unstemmed | “Whatever it takes” to resolve the European sovereign debt crisis? Bond pricing regime switches and monetary policy effects |
| title_short | “Whatever it takes” to resolve the European sovereign debt crisis? Bond pricing regime switches and monetary policy effects |
| title_sort | “Whatever it takes” to resolve the European sovereign debt crisis? Bond pricing regime switches and monetary policy effects |
| topic | euro area spreads crisis time-varying relationship unconventional monetary policy |
| topic_facet | euro area spreads crisis time-varying relationship unconventional monetary policy |
| url | http://hdl.handle.net/10400.5/15969 |
| visible | 1 |