Spreading the word or reducing the term spread? Assessing spillovers from euro area monetary policy

Konferenzbeitrag

As a consequence of asset purchases by the European Central Bank (ECB), longer- term yields in the euro area decline, and spreads between euro area long-term yields narrow. To assess spillovers of these recent financial developments, we use a Bayesian variant of the global vector autoregressive (BGVAR) model that uses shrinkage priors coupled with stochastic volatility. We find positive and signif- icant spillovers to industrial production in Central, Eastern and Southeastern Europe (CESEE) and other non-euro area EU member states. These effects are transmitted via the financial channel (mainly through interest rates and equity prices) and outweigh costs of appreciation pressure on local currencies vis-a-vis the euro (trade channel). That both shocks yield rather similar results adds narrowing longer-term yields in the euro area as a viable alternative to the pol- icymakers' toolkit. While these results represent general trends, we also find evidence for both cross-country heterogeneity of effects within the euro area and region-specific spillovers thereof.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2017: Alternative Geld- und Finanzarchitekturen - Session: International Economics ; No. E01-V2

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models; Multiple Variables: General ; Monetary Policy ; Open Economy Macroeconomics ; Business Fluctuations; Cycles
• Subject: Euro area monetary policy ; quantitative easing ; spillovers

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Feldkircher, Martin ; Gruber, Thomas ; Huber, Florian
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel, Hamburg
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/168111
• Last update: 10.03.2025, 11:45 AM CET