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The Financial and Macroeconomic Effects of OMT Announcements

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  • Giannone, Domenico
  • Lenza, Michele
  • Altavilla, Carlo

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.

Suggested Citation

  • Giannone, Domenico & Lenza, Michele & Altavilla, Carlo, 2014. "The Financial and Macroeconomic Effects of OMT Announcements," CEPR Discussion Papers 10025, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10025
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    More about this item

    Keywords

    Event study; Multi-country vector autoregressive model; News; Outright monetary transactions;
    All these keywords.

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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