Empir Econ https://doi.org/10.1007/s00181-018-1467-y Restoring euro area monetary transmission: Which role for government bond rates? 1 1,2 Nikolay Hristov · Oliver Hülsewig · 3 1,4 Thomas Siemsen · Timo Wollmershäuser Received: 20 May 2016 / Accepted: 4 May 2018 © Springer-Verlag GmbH Germany, part of Springer Nature 2018 Abstract For a number of euro area periphery countries, this paper explores the stability of the link between bank lending rates and yields on sovereign bonds. A stable relationship between these interest rates is important for the ECB’s attempt to restore monetary policy transmission by conducting unconventional measures that aim at bringing down government bond rates. Using vector autoregressive models with time-varying parameters, we ﬁnd that bank lending rates adjusted incompletely to changes in government bond rates before the onset of the ﬁnancial crisis, while their responsiveness has even further weakened thereafter. Thus, our results suggest that periphery bank lending rates have not only decoupled from policy rates after mid-2008, but also from yields on sovereign bonds. Keywords ECB · Unconventional monetary policy · Euro area crisis · Interest rate link · Time-varying parameter vector autoregressive models We would like to thank two anonymous referees for helpful comments and suggestions. We are
Empirical Economics – Springer Journals
Published: May 31, 2018
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