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Discussion Paper Details

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Title: The Financial and Macroeconomic Effects of OMT Announcements

Author(s): Carlo Altavilla, Domenico Giannone and Michele Lenza

Publication Date: June 2014

Keyword(s): event study, multi-country vector autoregressive model, news and Outright Monetary Transactions

Programme Area(s): International Macroeconomics

Abstract: This study evaluates the macroeconomic effects of Outright Monetary Transaction (OMT) announcements by the European Central Bank (ECB). Using high-frequency data, we find that OMT announcements decreased the Italian and Spanish 2-year government bond yields by about 2 percentage points, while leaving unchanged the bond yields of the same maturity in Germany and France. These results are used to calibrate a scenario in a multi-country model describing the macrofinancial linkages in France, Germany, Italy, and Spain. The scenario analysis suggests that the reduction in bond yields due to OMT announcements is associated with a significant increase in real activity, credit, and prices in Italy and Spain with relatively muted spillovers in France and Germany.

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Bibliographic Reference

Altavilla, C, Giannone, D and Lenza, M. 2014. 'The Financial and Macroeconomic Effects of OMT Announcements'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10025