Investigating the Impact of Sovereign Interest Rates on Corporate Borrowing Costs in the Euro Area

2011 ◽  
Author(s):  
Antoine Bouveret
Keyword(s):  
Interest Rates ◽  
Euro Area ◽  
Borrowing Costs ◽  
Corporate Borrowing ◽  
The Impact

scholarly journals Monetary Policy Surprises over Time

2018 ◽  
Vol 08 (01) ◽  
pp. 1840002 ◽  
Author(s):  
Marcello Pericoli ◽  
Giovanni Veronese
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Interest Rates ◽  
Euro Area ◽  
Yield Curve ◽  
Sovereign Spreads ◽  
Definition Of ◽  
Term Premia ◽  
The Impact ◽  
Over Time

We document how the impact of monetary surprises on euro-area and US financial markets has changed from 1999 to date. We use a definition of monetary policy surprises, which singles out movements in the long-end of the yield curve — rather than those changing nearby futures on the central bank reference rates. By focusing only on this component of monetary policy, our results are more comparable over time. We find a hump-shaped response of the yield curve to monetary policy surprises, both in the pre-crisis period and since 2013. During the crisis years, Fed path-surprises, largely through their effect on term premia, account for the impact on interest rates, which is found to be increasing in tenor. In the euro area, the path-surprises reflect the shifts in sovereign spreads, and have a large impact on the entire constellation of interest rates, exchange rates and equity markets.

Low Interest Rates do they Revise Household Saving Motives in the Euro Area?

e-Finanse ◽  
2016 ◽  
Vol 12 (1) ◽  
pp. 43-56
Author(s):  
Katarzyna Kochaniak
Keyword(s):  
Interest Rates ◽  
Monetary Union ◽  
Euro Area ◽  
Union Member ◽  
Household Saving ◽  
Low Interest Rates ◽  
The Impact

AbstractThis paper presents the impact of decreasing MFI interest rates on household deposits and saving goals in 12 Monetary Union member countries in the years 2009-2015. It analyses tendencies in household deposits (overnight, with agreed maturity and redeemable at notice), and attempts to link them with certain household saving motives (target, retirement and precautionary). The paper identifies those deposit categories which appeared as sensitive to declining interest rates and indicates the Eurozone countries whose populations are expected to revise their savings plans. Precise implications are drawn for target saving motives of households in Austria, Cyprus and Malta. However, in the case of two other motives, the analysis does not conclude on the impact of decreasing MFI interest rates.

scholarly journals Public Deficits and Borrowing Costs: The Missing Half of Market Discipline

2001 ◽  
Vol 19 (2) ◽  
pp. 169-190 ◽  
Author(s):  
Friedrich Heinemann ◽  
Viktor Winschel
Keyword(s):  
Interest Rates ◽  
Public Debt ◽  
Market Discipline ◽  
Borrowing Costs ◽  
Budgetary Policy ◽  
Primary Surplus ◽  
Political Economic ◽  
The Impact ◽  
Growth Differential ◽  
Public Deficits

Abstract EMU driven interest rates’ convergence has led to a significant reduction of borrowing costs for some European governments in the second half of the nineties. The paper deals with the possible consequences for deficit behaviour. Although the impact of interest rates on deficits is a crucial element of the market discipline hypothesis, it has widely been neglected in the literature. In the theoretical part, a standard political economic model of budgetary policy (Hettich-Winer) is adapted. It turns out that borrowing costs, measured as the interest-growth-differential, and the level of public debt should be important determinants for public deficits. The econometric part tests these predictions for a panel of OECD countries. The results indicate that there is indeed a significant impact of borrowing costs on the primary surplus. This impact is characterised by a robust asymmetry: Reactions in times of increasing borrowing costs are more pronounced than in times of relaxing conditions.

scholarly journals The Impact of the European Central Bank’s Interest Rates on Investments in the Euro Area

2017 ◽  
Vol 291 (5) ◽  
pp. 51-72
Author(s):  
Joanna Stawska ◽  
Katarzyna Miszczyńska
Keyword(s):  
Interest Rates ◽  
Euro Area ◽  
European Central ◽  
The Impact

scholarly journals THE IMPACT OF THE MONETARY - FISCAL POLICY MIX ON INVESTMENTS OF EURO AREA COUNTRIES IN THE CONTEXT OF THE FINANCIAL CRISIS

2012 ◽  
Vol 8 (1) ◽  
pp. 228-236
Author(s):  
Joanna Stawska
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Crisis ◽  
Interest Rates ◽  
Euro Area ◽  
Debt Crisis ◽  
Policy Mix ◽  
Monetary Authorities ◽  
Recent Financial Crisis ◽  
The Impact

The study presents the impact of monetary-fiscal policy mix on economic growth, mainly for the investments of euro area in financial crisis. Fiscal policy and monetary policy play an important role in the economy, influencing each other and on a number of economic variables as well. In the face of the recent financial crisis, which turned into a debt crisis, fiscal and monetary authorities have been working together to revive economic activity. There was a significant economic impact on the level of government investments. The central bank kept interest rates at very low levels and used nonstandard instruments of monetary policy. Fiscal authorities have increased government spending to stimulate investment and economic recovery. The paper concludes that the management of the fiscal and monetary authorities in a crisis situation has been modified compared to the period before the crisis, when the coordination of these policies was clearly weaker.

scholarly journals MONETARY POLICY IN CRISIS

2020 ◽  
Author(s):  
Yuriy Nikolayev ◽  
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Financial Performance ◽  
Interest Rates ◽  
Euro Area ◽  
Debt Crisis ◽  
Emerging Market ◽  
Quantitative Easing ◽  
Bank Of Japan ◽  
The Impact

The article is devoted to the study of conditions of application and influence of non-traditional monetary policy of central banks of developed countries on national economies and economies of emerging market countries. Based on critical analysis and systematization of basic research on the analysis of non-traditional monetary policy and its impact on the economies of different countries, it is substantiated that non-traditional monetary policy is a set of measures aimed at restoring the transmission mechanism and eliminating financial market imbalances. The main tools of non-traditional monetary policy are - previous management, quantitative easing; credit easing; negative interest rates, qualitative mitigation. Relevant areas of research on the financial performance of economies were also justified, as monetary policy directly affects interest rates, money supply, exchange rates, availability of credit, and through the financial sector to other sectors of the economy. During the aggravation of the economic and debt crisis, which had a negative impact on the Eurozone countries, investors' interest in CEE countries increased due to higher interest rates and the opportunity to make more profits. The study of the impact of the ECB's monetary policy on the financial indicators of Central and Eastern Europe revealed that the ECB's unconventional policy, including quantitative easing aimed at lowering long-term interest rates, affected the yield on government bonds of almost all EU countries, not only member states. euro area, which generally declined after 2014. Non-traditional monetary policy and an increase in the ECB's balance sheet also affect investment flows to CEE countries, but are mainly debt instruments in both direct and portfolio investment. The opposite situation is observed in the Eurozone countries with a high debt burden, especially in Greece and Italy. Despite the fact that the ECB's policy has led the euro area countries with a high level of debt to reduce the debt-to-GDP ratio, there is a tendency to increase the share of public debt payments to GDP. In this situation, the ECB simply cannot significantly change the purpose of its monetary policy, because any, even small, increase in the discount rate will lead to a new debt crisis in the Eurozone with its epicenter in Italy and Greece. The study of the impact of non-traditional policies of the Bank of Japan, the Fed and the ECB on the economy of Ukraine confirms the hypothesis that the actions of the ECB have the greatest impact on the financial performance of Ukraine. The analysis shows the impact of non-traditional monetary policy on the exchange rate of the Ukrainian hryvnia to the euro, US dollar and Japanese yen, but it was not significant. This is due to the fact that monetary policy in Ukraine only in 2015 actually moved from a fixed exchange rate to a floating exchange rate and began to apply inflation targeting. Announcements of non-traditional monetary policy have also affected government bond yields and stock indices, but the Ukrainian stock market is underdeveloped and has little effect. The main influence was the first programs of non-traditional monetary policy of the ECB, the USA and the Bank of Japan. In times when non-traditional measures were just being introduced and difficult to regulate and predict. Thus, it was proved that, on the one hand, unconventional monetary policy can stimulate economic growth, and on the other hand, create significant risks for further monetary policy opportunities to counter future crises.

scholarly journals TESTING THE HOMOGENEOUS INTEREST RATES ASSUMPTION BY PRINCIPAL COMPONENT ANALYSIS: THE EURO AREA CASE

Ekonomika ◽  
2010 ◽  
Vol 89 (3) ◽  
pp. 30-39
Author(s):  
Jerzy Stelmach
Keyword(s):  
Principal Component Analysis ◽  
Interest Rates ◽  
Euro Area ◽  
Model Building ◽  
Yield Curve ◽  
Principal Component ◽  
Component Analysis ◽  
Applied Model ◽  
Analysis Technique ◽  
The Impact

Although there are many different interest rates in the economy, in theoretical and applied model building these distinctions are usually ignored by assuming that there is only one, “true” interest rate. Hence, the aim of this article is twofold. First, we empirically examine whether such assumption is plausible for the Euro area yield curve data. Second, using different time spans we try to assess the impact of the financial crisis on the validity of this assumption. For both purposes, the principal component analysis technique will be employed.

The impact of the ECB’s monetary policy on corporate borrowing costs

2021 ◽  
pp. 2150014
Author(s):  
Houssam Bouzgarrou ◽  
Siwar Ben Afia ◽  
Abdelkader Derbali
Keyword(s):  
Monetary Policy ◽  
Corporate Bond ◽  
Credit Spreads ◽  
Borrowing Costs ◽  
Corporate Bond Market ◽  
Corporate Credit ◽  
Daily Data ◽  
Corporate Borrowing ◽  
Financial Credit ◽  
The Impact

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.

scholarly journals The impact of public debt on the long-term interest rates in the euro area member countries during 2003-2010

2011 ◽  
Vol 2 (3) ◽  
pp. 23-42
Author(s):  
Piotr Misztal
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Euro Area ◽  
Public Debt ◽  
Empirical Studies ◽  
Impulse Response Function ◽  
The Real ◽  
The Impact ◽  
The Relationship

The main aim of the article is to analyze the relationship between public debt and the real, long-term interest rates in the euro area member countries during 2003-2010. The first part dealt with theoretical analysis and the most important results of empirical studies concerning the relationship between public debt and the real, long-term interest rates. In the next part of article, there were examined the relationships between public debt and the real, long-term interest rates in the euro area countries by using the Vector Autoregression Model (VAR). There were estimated elasticity coefficients of the real, long-term interest rates to public debt and measured the impact strength of public debt to changes in the real, long-term interest rate in the euro area member countries using the impulse response function. This was followed by decomposition of the real, long-term interest rate to estimate the impact of public debt and the real, long-term interest rate changes on the volatility of the real, long-term interest rate in the euro area member countries.

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