Heterogeneous effects of unconventional monetary policy on the bond yields across the Euro Area

This paper investigates the impact of the European Central Bank’s unconventional monetary policies (UMP) between 2008 and 2019 on European government bond yields. It adopts a novel econometric approach that combines data-rich factor analysis and Vector autoregression (VAR) with heteroskedastic-based identification. The results identify a significant and substantial impact for all countries and maturities, but a stronger and persistent impact for the periphery. When we decompose the impact into separate components, we find that UMP decreases the market component for all countries. It decreases the risk-mutualization component for the periphery permanently at the cost of a small increase for the core countries, which provides evidence for risk-mutualization in the EMU.

This is the peer reviewed version of the following article: DEMİR, İ., EROĞLU, B.A. and YILDIRIM-KARAMAN, S. (2022), Heterogeneous Effects of Unconventional Monetary Policy on the Bond Yields across the Euro Area. Journal of Money, Credit and Banking., which has been published in final form at https://doi.org/10.1111/jmcb.12886. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited