Working Paper: CEPR ID: DP10025
Authors: Carlo Altavilla; Domenico Giannone; Michele Lenza
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.
Keywords: Event Study; Multicountry; Vector Autoregressive Model; News; Outright Monetary Transactions
JEL Codes: C54; E47; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| decrease in government bond yields in Italy and Spain (E43) | increase in real economic activity in Italy and Spain (O52) |
| decrease in government bond yields in Italy and Spain (E43) | increase in credit in Italy and Spain (F65) |
| decrease in government bond yields in Italy and Spain (E43) | increase in prices in Italy and Spain (P22) |
| OMT announcements (E60) | decrease in government bond yields in Italy and Spain (E43) |
| OMT announcements (E60) | changes in real economic activity in Italy and Spain (N14) |
| OMT announcements (E60) | changes in credit in Italy and Spain (F65) |
| OMT announcements (E60) | changes in prices in Italy and Spain (P22) |