Discussion paper

DP10025 The Financial and Macroeconomic Effects of OMT Announcements

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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Citation

Giannone, D, M Lenza and C Altavilla (2014), ‘DP10025 The Financial and Macroeconomic Effects of OMT Announcements‘, CEPR Discussion Paper No. 10025. CEPR Press, Paris & London. https://cepr.org/publications/dp10025