Download or read book European Sovereign Bond Liquidity and Central Bank Interventions written by Gerold Willershausen and published by . This book was released on 2018-04-23 with total page 160 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Managing the Sovereign Bank Nexus written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2018-09-07 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.

Download or read book The Liquidity Effects of Official Bond Market Intervention written by Michiel De Pooter and published by . This book was released on 2016 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: To "ensure depth and liquidity," the European Central Bank intervened in sovereign debt markets through its Securities Markets Programme (SMP), providing a unique opportunity to estimate the effects of large-scale asset purchases on sovereign bond liquidity premia. From reduced-form estimates, we find robust, economically significant impact and lasting reductions in sovereign bonds' liquidity premia in response to official purchases. We develop a search-based asset-pricing model to understand our empirical results. The theory implies that bond liquidity premia fall in response to both official purchases and rising sovereign default probabilities, as seen in the data.

Download or read book The Interventions of the European Central Bank Throughout the Crisis written by Javier Villar Burke and published by . This book was released on 2017 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Throughout the crisis, the ECB implemented a number of unprecedented measures with a wider and wider reach. These measures included a decrease of the policy rate to virtually zero, the extension of the maturities of its liquidity providing operations, an expansion in total liquidity injected in the economy, relaxing collateral requirements, the purchase of government and corporate bonds or allowing net liquidity to grow. This paper reviews and puts into perspective all these measures.The astronomic amounts of liquidity mobilised have put high hopes in the capacity of monetary policy to reactivate the flow of credit to the economy and support the recovery. However, the actual outcome seems not to have matched those high expectations. In this context, this paper also discussed two important constraints limiting the actual capacity of the central bank to impact the economy. 1) assets and liabilities make up an unavoidable accounting identity which implies that any “fresh” liquidity created by the ECB by increasing its assets is simultaneously absorbed or “destroyed” from the liabilities side. 2) The high level of independence of the ECB comes hand in hand with a confinement to a very narrow mandate. Indeed, the questioning of the OMT by the German Constitutional Court explains why the “quantitative easing” of the PSPP is significantly constrained by a mechanical implementation of the capital key. The PSPP has limited flexibility to focus on the most relevant market segments where the monetary transmission appears to be “broken”

Download or read book Central Bank Emergency Support to Securities Markets written by Darryl King and published by International Monetary Fund. This book was released on 2017-07-10 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper considers the central bank mandate with respect to financial stability and identifies the links to the functioning of securities markets. It argues that while emergency support to securities markets is an important part of the crisis management response, a high bar should be set for its use. Importantly, it should be used only as part of a comprehensive policy package. The paper considers what types of securities markets may be important for financial stability, what market conditions could trigger emergency support measures, and how programs can be designed to restore market functioning while minimizing moral hazard.

Download or read book The Impact of ECB Monetary Policy on Stock and Bond Market Liquidity The Case of Germany written by Terence Kappeln and published by GRIN Verlag. This book was released on 2016-01-18 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2015 in the subject Economics - Finance, grade: 1,0, Vienna University of Economics and Business (Finance and Accounting), language: English, abstract: During the financial crisis and the following Eurozone crisis, liquidity in financial markets basically froze and became a problem for the real economy. Therefore, market liquidity became one of the major concerns of the ECB, which applied non-standard measures, e.g. irregular asset purchasing programmes. This paper sheds light on the impact of monetary policy on liquidity levels of the DAX 30 equity index and German 10-year government bonds. For the following analysis, the monetary policy impacts are estimated using the base money growth rate and EONIA rate, whereas the relative bid-ask spread is employed for measuring liquidity levels. The research method includes literature-based research about common market liquidity theories, a short timeline of important ECB monetary policy decisions, descriptive statistics on liquidity levels and monetary policy variables and a VAR analysis, including variables spreads, returns, volatilities, industrial production and inflation. The results indicate that a decrease (increase) in stock market liquidity or an increase (decrease) in bondmarket volatility lead to a decrease (increase) of EONIA. Furthermore, decreases (increases) in stock return or industrial production result in a decrease (increase) of EONIA. However, base money growth is positively correlated only to changes in bond market volatility. Overall, the results suggest that the monetary policy decisions by the ECB are influenced by changing market conditions without the ability to forecast liquidity levels.

Download or read book Monetary Policy Financial Crises and the Macroeconomy written by Frank Heinemann and published by Springer. This book was released on 2017-09-29 with total page 349 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume investigates different aspects of monetary policy and prevention of financial crises. It discusses some recently suggested measures for central banks' responses to liquidity shortages and to the liquidity trap, methods for assessing the potential of crisis contagion via the interbank network, and the interaction between micro- and macro-prudential regulation. It compares different approaches for solving the Eurozone sovereign-debt problem and provides a new and intriguing explanation for rising income inequality. The authors are experts on monetary policy, financial crises, and contract theory from different European universities and central banks.

Download or read book Government Bonds and their Investors written by Mr.Jochen R. Andritzky and published by International Monetary Fund. This book was released on 2012-06-01 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper introduces a new dataset on the composition of the investor base for government securities in the G20 advanced economies and the euro area. During the last decades, investors from abroad have increased their presence in government bond markets. The financial crisis broke this trend. Domestic financial institutions allocated a larger share of government securities in their portfolios, as Japan has done since its crisis in the 1990s. Increases in the share held by institutional investors or non-residents by 10 percentage points are associated with a reduction in yields by about 25 or 40 basis points, respectively. The data show a varied lead-lag relationship between bond yields and investor holdings. Portfolio balance estimates suggest that a change in statutory or regulatory holdings of government securities to the tune of 10 percent of the outstanding stock causes expected returns to decline by 7 to 25 basis points.

Download or read book The Scarcity Effect of Quantitative Easing on Repo Rates Evidence from the Euro Area written by William Arrata and published by International Monetary Fund. This book was released on 2018-12-07 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most short-term interest rates in the Euro area are below the European Central Bank deposit facility rate, the rate at which the central bank remunerates banks’ excess reserves. This unexpected development coincided with the start of the Public Sector Purchase Program (PSPP). In this paper, we explore empirically the interactions between the PSPP and repo rates. We document different channels through which asset purchases may affect them. Using proprietary data from PSPP purchases and repo transactions for specific (“special") securities, we assess the scarcity channel of PSPP and its impact on repo rates. We estimate that purchasing 1 percent of a bond outstanding is associated with a decline of its repo rate of 0.78 bps. Using an instrumental variable, we find that the full effect may be up to six times higher.

Download or read book The European Central Bank between the Financial Crisis and Populisms written by Corrado Macchiarelli and published by Springer Nature. This book was released on 2020-08-25 with total page 197 pages. Available in PDF, EPUB and Kindle. Book excerpt: ​In light of the handover from the European Central Bank President Mario Draghi to Christine Lagarde in November 2019, this book provides an in-depth analysis of the events which unfolded since the euro area sovereign debt crisis in 2010 up until today. The book focuses on the far-reaching implications of the last decade, shedding light on a wide spectrum of political, economic and financial aspects of the European poly-crises and how monetary policy reacted to these challenges. The book places particular emphasis on the tensions that the supranational central bank was subject to during this period, and on their outcomes in terms of the policies, their legitimacy, and their public reception. As such, this book will be relevant not only to understand the political implications of the past crisis but also, and foremost, in understanding "what is next".

Download or read book Handbook of Fixed Income Securities written by Pietro Veronesi and published by John Wiley & Sons. This book was released on 2016-04-04 with total page 630 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive guide to the current theories and methodologies intrinsic to fixed-income securities Written by well-known experts from a cross section of academia and finance, Handbook of Fixed-Income Securities features a compilation of the most up-to-date fixed-income securities techniques and methods. The book presents crucial topics of fixed income in an accessible and logical format. Emphasizing empirical research and real-life applications, the book explores a wide range of topics from the risk and return of fixed-income investments, to the impact of monetary policy on interest rates, to the post-crisis new regulatory landscape. Well organized to cover critical topics in fixed income, Handbook of Fixed-Income Securities is divided into eight main sections that feature: • An introduction to fixed-income markets such as Treasury bonds, inflation-protected securities, money markets, mortgage-backed securities, and the basic analytics that characterize them • Monetary policy and fixed-income markets, which highlight the recent empirical evidence on the central banks’ influence on interest rates, including the recent quantitative easing experiments • Interest rate risk measurement and management with a special focus on the most recent techniques and methodologies for asset-liability management under regulatory constraints • The predictability of bond returns with a critical discussion of the empirical evidence on time-varying bond risk premia, both in the United States and abroad, and their sources, such as liquidity and volatility • Advanced topics, with a focus on the most recent research on term structure models and econometrics, the dynamics of bond illiquidity, and the puzzling dynamics of stocks and bonds • Derivatives markets, including a detailed discussion of the new regulatory landscape after the financial crisis and an introduction to no-arbitrage derivatives pricing • Further topics on derivatives pricing that cover modern valuation techniques, such as Monte Carlo simulations, volatility surfaces, and no-arbitrage pricing with regulatory constraints • Corporate and sovereign bonds with a detailed discussion of the tools required to analyze default risk, the relevant empirical evidence, and a special focus on the recent sovereign crises A complete reference for practitioners in the fields of finance, business, applied statistics, econometrics, and engineering, Handbook of Fixed-Income Securities is also a useful supplementary textbook for graduate and MBA-level courses on fixed-income securities, risk management, volatility, bonds, derivatives, and financial markets. Pietro Veronesi, PhD, is Roman Family Professor of Finance at the University of Chicago Booth School of Business, where he teaches Masters and PhD-level courses in fixed income, risk management, and asset pricing. Published in leading academic journals and honored by numerous awards, his research focuses on stock and bond valuation, return predictability, bubbles and crashes, and the relation between asset prices and government policies.

Download or read book The Impact of European Central Bank Intervention Announcements on Stock and Bond Markets During Crisis written by Tina Theresa Koglbauer and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Even though the 2008 Financial Crisis ended nearly a decade ago, the impact of monetary policy announcements of the ECB is still an ongoing research topic. Hence the question pursued in this study is how both conventional and unconventional monteray policiy announcemnts of the ECB affected the stock-and bond markets of 11 EMU member countries during varying time periods. To test the hypothesis whether unconventional monetary policy announcements had a more significant impact on peripheal EMU member countries compared to core ones, past stock and bond market data such as daily stock returns of the main stock market indices and bond yields of each countries 10-year government bond were collected. An event study analysis revealed that unconventional monetary polcies overall had a greater impact on EMU members stock and bond markets. In conclusion, it showed that unconventional monetary policies were more effective than conventional ones, especially for peripheray countries as opposed to core EMU countries.This outcome may have implications for future crisis management and the expectations and outlook both professionals and individuals have on monetary policy announcements. *****Even though the 2008 Financial Crisis ended nearly a decade ago, the impact of monetary policy announcements of the ECB is still an ongoing research topic. Hence the question pursued in this study is how both conventional and unconventional monteray policiy announcemnts of the ECB affected the stock-and bond markets of 11 EMU member countries during varying time periods. To test the hypothesis whether unconventional monetary policy announcements had a more significant impact on peripheal EMU member countries compared to core ones, past stock and bond market data such as daily stock returns of the main stock market indices and bond yields of each countries 10-year government bond were collected. An event study analysis revealed that unconventional monetary polcies overall had a greater impact on

Download or read book Outright Monetary Transactions Should the ECB intervene in the Eurocrisis by buying Bonds of Crisis Countries written by and published by GRIN Verlag. This book was released on 2015-06-11 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2015 in the subject Economics - Macro-economics, general, grade: 1,5, Leipzig Graduate School of Management (Lehrstuhl für Makroökonomie), course: Macroeconomics, language: English, abstract: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” – Mario Draghi, July 2012 In July 2012, at the Global Investment Conference in London, Mario Draghi emphasized the strength and irreversibility of the Euro as single currency of the European Union. At that time the Euro crisis had been facing its greatest challenge, with Portugal, Ireland, Greece and Spain ́s heavy indebted balances. Esodic to this crisis have been several occurrences. In 2011, the European Stability Mechanism (ESM) with 500bn euros has been set up, after the four heavily indebted coun-tries did not manage to escape their indebtedness themselves. Accordingly, the yields on their government bonds have risen sharply, as investors demanded huge re-turns to borrow. As a consequence, the countries ́ borrowing costs grew proportionately. Together with the stagnation of the economic growth at 0.2%, the downgrading of Italy, France and the European Financial Stability Fund (EFSF) by Standard&Poor ́s followed. In his speech, Mario Draghi announced concrete future actions of the ECB to come, which resulted in Outright Monetary Transactions (OMT). Within OMT, the European Central Bank (ECB) buys government bonds of struggling EU countries on the secondary markets. Therewith, borrowing costs are reduced, easing the burden of decimating budget deficits. Even though the markets reacted positively, the program is not homogeneously evaluated positively. In order to gain an overview of issues related to the OMT program, his paper analyzes both the advantages and the risks of an ECB intervention into the European debt crisis by pur-chasing government bonds of crisis countries. Supportively, suitable economic models are applied. The paper closes with a critical reflection.

Download or read book Sovereign Credit Risk Liquidity and ECB Intervention written by Loriana Pelizzon and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the dynamic relationship between credit risk and liquidity in the sovereign bond market in the context of the European Central Bank (ECB) interventions. Using a comprehensive set of liquidity measures obtained from a detailed, quote-level dataset of the largest interdealer market for Italian government bonds, we show that changes in credit risk, as measured by the Italian sovereign credit default swap (CDS) spread, generally drive the liquidity of the market: a 10% change in the CDS spread leads a 11% change in the bid-ask spread. This relationship is stronger, and the transmission is faster, when the CDS spread is above the 500 basis point threshold, estimated endogenously, and can be ascribed to changes in margins and collateral, as well as clientele effects. Moreover, we show that the Long-Term Refinancing Operations (LTRO) intervention by the ECB weakened the sensitivity of the liquidity provision by the market makers to changes in the Italian government's credit risk. We also document the importance of market-wide and dealer-specific funding liquidity measures in determining the market liquidity for Italian government bonds.

Download or read book Central Bank Policies and Financial Markets written by Ashoka Mody and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The European Central Bank (ECB) took many measures to combat the eurozone's rolling financial crisis. For providing desperately scarce dollars to eurozone banks, the ECB relied on the U.S. Federal Reserve. Using a novel econometric framework, we identify financial markets' response to the ECB's liquidity injections and its more pro-active monetary stimulus between October 2009 and September 2012, the most intense phase of the eurozone crisis. Dollar liquidity clearly reduced stress in bond markets and improved economic sentiment, as reflected in higher equity prices. In contrast, passive euro liquidity provision and even active measures (policy rate reductions and bond market interventions) delivered modest results. Although government bond spreads did typically decline, markets remained worried that spreads could rise quickly; moreover, broad economic sentiment remained unchanged. Only the Outright Monetary Transactions (OMT) "bazooka" had a substantial beneficial effect. Overall, the results point to the ECB's limits in helping improve financial market's sentiment.

Download or read book Only a More Active ECB Can Solve the Euro Crisis written by Paul de Grauwe and published by . This book was released on 2011 with total page 7 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper asserts that the contagion currently afflicting sovereign bond markets in the eurozone can only be stopped if there is a central bank willing to be lender of last resort, i.e. willing to guarantee that the cash will always be available to pay out the bondholders. Until recently, the European Central Bank performed this role either directly by buying government bonds, or indirectly by accepting government bonds as collateral in its liquidity provision to the banking system, but it has made it clear that it is now unwilling to continue to do so. The author argues that this reluctance of the ECB to take up its responsibility as a lender of last resort is the single most important factor explaining why the forces of contagion in the eurozone's sovereign bond markets have not been stopped.--Publisher description.

Download or read book The European Sovereign Debt Crisis written by Phoebus L. Athanassiou and published by Routledge. This book was released on 2021-08 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The European Sovereign Debt Crisis: Breaking the Vicious Circle Between Sovereigns and Banks explains why the euro area's progress in reining-in the risks arising from the well-documented bi-directional financial contagion transmission mechanism that links sovereigns to commercial banks has been more prominent in respect of the channel of contagion moving from banks to sovereigns. Providing an analysis of the legal and regulatory measures that Europe and the euro area have taken to mitigate the exposure of sovereigns to financial crises generated by commercial banks, this book draws attention to areas where improvements to the arsenal of tools hitherto introduced are either desirable or necessary. Chapters further explain - with recourse to economic and legal arguments - why the channel of contagion moving from sovereigns to commercial banks has proven harder to close, and explores ways in which progress could be made in the direction of closing it so as to avert the risk of future banking sector crises. This work provides essential reading for students, researchers and practitioners with an interest in sovereign debt crises and the euro area banking system. Phoebus L. Athanassiou (LL.B, LL.M, Ph.D) is Senior Lead Legal Counsel with the Legal Services of the European Central Bank, a published author of works on banking and financial law, and a member of the Academic Faculty of the Institute of Law and Finance at the Goethe University of Frankfurt, Germany. Angelos T. Vouldis (M.Eng, MSc, Ph.D) is an Economist at the European Central Bank, with year-long policy experience in financial crises and the stress testing of financial institutions. He has published extensively in leading journals on banking, financial stability, business cycles and institutional change"--