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 language | English |
---|---|
Publication date | 2019 |
Number of pages | 66 |
Publication status | Published - 2019 |
Event | 2019 China International Conference in Finance - Sofitel Guangzhou Sunrich, Guangzhou, China Duration: 9 Jul 2019 → 12 Jul 2019 http://www.cicfconf.org/ |
Conference
Conference | 2019 China International Conference in Finance |
---|---|
Location | Sofitel Guangzhou Sunrich |
Country/Territory | China |
City | Guangzhou |
Period | 09/07/2019 → 12/07/2019 |
Internet address |
Keywords
- Interest rates
- Monetary policy
- Central bank communication
- Risk premia
- Eurozone