Unconventional Monetary Policy in the Eurozone: A Lack of Forward Guidance? |
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Authors: | Cécile Bastidon Nicolas Huchet |
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Institution: | LEAD, University of Toulon, Toulon, France |
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Abstract: | From July to December 2011, the three-month EURIBOR-OIS and EURIBOR-Repo spreads quadrupled and reached 100 basis points due to a stabilization of the EURIBOR and a decrease in the overnight index swap (OIS) and Repo. Using a specific monetary policy announcements and financial indicators database, we find that the European Central Bank’s (ECB’s) unconventional measures did not systematically have a calming effect: Asset buyout announcements decreased market strains, whereas interest rates and liquidity provision announcements did not. Moreover, liquidity provision seems to have a stressing effect. Our findings are consistent with the theoretical underpinnings according to which forward guidance crucially determines the effectiveness of unconventional monetary policies. |
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Keywords: | unconventional monetary policy European Central Bank interest rates policy events forward guidance |
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