Narrow Results

This paper examines the impact of the ECB’s monetary policy on corporate borrowing costs. We use an event study method to assess and compare the effects of both conventional and unconventional monetary policy on Germany and French corporate bond market (credit spreads). The sample of our research consists of daily data collected during the period from 04 January 1999 to 27 February 2015. This period spans the pre-crisis which begins when the ECB has launched the Economic and Monetary Union (EMU) and became responsible for the monetary policy in the euro area. We find significantly negative relation between conventional surprise and corporate credit spreads. Moreover, we find that a raise in German non-financial credit spreads and French credit spreads domestic in response to the SMP announcement. The OMT lowers the German non-financial credit spreads, while it raises German bank credit spreads and French corporate credit spreads both domestic and bund for two sectors. Finally, the LTROs are associated with a raise in corporate credit spreads. Our findings are confirmed in robustness checks by changing the non-standard monetary policy announcements with monetary policy event dummies used as one variable.

This paper analyses the importance of ECB monetary policy shocks in the domestic activities of a non-EMU member, Croatia, with the main focus on the inflation rate. Using a Vector Autoregressive Model with an exogenous variable specification, it is found that the contraction of foreign monetary shocks have a significant positive impact on the local inflation rate and output. Interestingly, the interest rate gap exerts a statistically significant effect on the economic activities of Croatia, suggesting that targeting exchange rate stability does not eliminate the significance of ECB’s monetary policy changes.

This paper provides an analysis of the liquidity management of the euro. We tested the influence of five variables (the exchange rate, the price of oil, the EU deficit, the EU interest rate, and the U.S. interest rate) on the euro liquidity supply in addition to the fluctuation of the liquidity supply before and after September 11, 2001. While the literature focuses on the internal European institutional environment, this study looks at the international systemic risks and their influence on the liquidity supply. Ultimately, we come to the conclusion that the ECB’s liquidity supply is affected by international factors.