Central Bank Communication and the Yield Curve

Matteo Leombroni, Andrea Vedolin, Gyuri Venter, Paul Whelan

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

Using the institutional features of ECB monetary policy announcements, we provide evidence for the risk premium channel of central bank communication. While central bank communication had a homogeneous effect across Euro-area sovereign bond yields before the European debt crisis, it drove a wedge between peripheral and core yields afterwards. Guided by the predictions of a theoretical model in which central bank communication reveals information about the state of the economy, we empirically link the periphery-core wedge to break-up and credit risk premia, and show that equity response to shocks can identify the strength of this risk premium channel.
Original languageEnglish
Publication date2019
Number of pages66
Publication statusPublished - 2019
Event2019 China International Conference in Finance - Sofitel Guangzhou Sunrich, Guangzhou, China
Duration: 9 Jul 201912 Jul 2019
http://www.cicfconf.org/

Conference

Conference2019 China International Conference in Finance
LocationSofitel Guangzhou Sunrich
CountryChina
CityGuangzhou
Period09/07/201912/07/2019
Internet address

Keywords

  • Interest rates
  • Monetary policy
  • Central bank communication
  • Risk premia
  • Eurozone

Cite this

Leombroni, M., Vedolin, A., Venter, G., & Whelan, P. (2019). Central Bank Communication and the Yield Curve. Paper presented at 2019 China International Conference in Finance, Guangzhou, China.
Leombroni, Matteo ; Vedolin, Andrea ; Venter, Gyuri ; Whelan, Paul. / Central Bank Communication and the Yield Curve. Paper presented at 2019 China International Conference in Finance, Guangzhou, China.66 p.
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Leombroni, M, Vedolin, A, Venter, G & Whelan, P 2019, 'Central Bank Communication and the Yield Curve' Paper presented at, Guangzhou, China, 09/07/2019 - 12/07/2019, .

Central Bank Communication and the Yield Curve. / Leombroni, Matteo; Vedolin, Andrea; Venter, Gyuri; Whelan, Paul.

2019. Paper presented at 2019 China International Conference in Finance, Guangzhou, China.

Research output: Contribution to conferencePaperResearchpeer-review

TY - CONF

T1 - Central Bank Communication and the Yield Curve

AU - Leombroni, Matteo

AU - Vedolin, Andrea

AU - Venter, Gyuri

AU - Whelan, Paul

PY - 2019

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N2 - Using the institutional features of ECB monetary policy announcements, we provide evidence for the risk premium channel of central bank communication. While central bank communication had a homogeneous effect across Euro-area sovereign bond yields before the European debt crisis, it drove a wedge between peripheral and core yields afterwards. Guided by the predictions of a theoretical model in which central bank communication reveals information about the state of the economy, we empirically link the periphery-core wedge to break-up and credit risk premia, and show that equity response to shocks can identify the strength of this risk premium channel.

AB - Using the institutional features of ECB monetary policy announcements, we provide evidence for the risk premium channel of central bank communication. While central bank communication had a homogeneous effect across Euro-area sovereign bond yields before the European debt crisis, it drove a wedge between peripheral and core yields afterwards. Guided by the predictions of a theoretical model in which central bank communication reveals information about the state of the economy, we empirically link the periphery-core wedge to break-up and credit risk premia, and show that equity response to shocks can identify the strength of this risk premium channel.

KW - Interest rates

KW - Monetary policy

KW - Central bank communication

KW - Risk premia

KW - Eurozone

KW - Interest rates

KW - Monetary policy

KW - Central bank communication

KW - Risk premia

KW - Eurozone

M3 - Paper

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Leombroni M, Vedolin A, Venter G, Whelan P. Central Bank Communication and the Yield Curve. 2019. Paper presented at 2019 China International Conference in Finance, Guangzhou, China.