Arbeitspapier
Dispelling the shadow of fiscal dominance? Fiscal and monetary announcement effects for euro area sovereign spreads in the corona pandemic
We use event study regressions to compare the impact of EU monetary versus fiscal policy announcements on government bond spreads of ten euro member countries. Our motivation is to evaluate which of the two players - the ECB or the EU fiscal level - has been more crucial for the stabilization of euro sovereign bond markets in the crisis environment of the pandemic. This question is of substantial relevance to assess potential risks for the effective independence of the ECB in the future. Our key result is that the pandemic monetary emergency measures through the PEPP have been highly effective, whereas fiscal rescue announcements had much less impact. We document a smaller and statistically significant spread-reducing effect only for the announcement of the 'Next Generation EU' program. In contrast, a temporary relaxation of European fiscal rules through the activation of the emergency-escape clause under the Stability and Growth Pact is associated with rising spreads. Our results have an unpleasant implication for the debate on a looming fiscal dominance of the ECB in the presence of rising public debt levels as so far, the stabilization of sovereign bond markets appears to hinge largely on the Eurosystem's role as a massive buyer of high-debt countries' sovereign bonds.
- Sprache
-
Englisch
- Erschienen in
-
Series: ZEW Discussion Papers ; No. 21-050
- Klassifikation
-
Wirtschaft
Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
Crisis Management
National Debt; Debt Management; Sovereign Debt
Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
- Thema
-
Sovereign spreads
monetary policy
fiscal policy
fiscal dominance
event analysis
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Havlik, Annika
Heinemann, Friedrich
Helbig, Samuel
Nover, Justus
- Ereignis
-
Veröffentlichung
- (wer)
-
ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
- (wo)
-
Mannheim
- (wann)
-
2021
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Havlik, Annika
- Heinemann, Friedrich
- Helbig, Samuel
- Nover, Justus
- ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
Entstanden
- 2021
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