December 2015 issue contents
The ECB Unconventional Monetary Policies: Have They Lowered Market Borrowing Costs for Banks and Governments?

by Urszula Szczerbowicz
CEPII

Abstract

This paper evaluates the impact of the ECB's unconventional policies on bank and government borrowing costs. We employ event-based regressions to assess and compare the effects of asset purchases and exceptional liquidity announcements on money markets, covered bond markets, and sovereign bond markets. The results show that (i) exceptional liquidity measures (three-year loans to banks and setting the ECB deposit rate to zero) significantly reduced persistent moneymarket tensions and that (ii) asset purchases were the most effective in lowering refinancing costs of banks and governments in the presence of high sovereign risk. Moreover, we show that the ECB asset purchases fed through into other asset prices: bank covered bond purchases diminished sovereign spreads, while sovereign bond purchases reduced covered bond spreads.

JEL Codes: E43, E44, E52, E58.

 
Full article (PDF, 37 pages, 1270 kb)