September 2016 issue contents
The financial and macroeconomic effects of the OMT announcements

by Carlo Altavilla,a Domenico Giannone,b and Michele Lenzaa, c


This paper evaluates the macroeconomic effects of the announcements of the European Central Bank's Outright Monetary Transactions (OMT) program. Using high-frequency data, we find that the OMT announcements decreased the Italian and Spanish two-year government bond yields by about 2 percentage points, while leaving unchanged the bond yields of the same maturity in Germany and France. These results are used to calibrate a scenario in a multi-country model describing the macrofinancial linkages in France, Germany, Italy, and Spain. The scenario analysis suggests that the reduction in bond yields due to the OMT announcements is associated with a significant increase in real activity, credit, and prices in Italy and Spain, with some relatively muted spillovers in France and Germany.

JEL Codes: E47, E58, C54.

Full article (PDF, 29 pages, 617 kb) 
Discussion by Stefania D'Amico

a European Central Bank 
b Federal Reserve Bank of New York and CEPR