Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130763
Authors: 
Jäger, Jannik
Grigoriadis, Theocharis
Year of Publication: 
2016
Series/Report no.: 
Discussion Paper, School of Business & Economics: Economics 2016/7
Abstract: 
During the European financial crisis, the European Central Bank implemented a series of unconventional monetary policy measures. We argue that these unconventional monetary policy measures created soft budget constraints for the Eurozone countries by lowering their bond yield spreads. This hypothesis is tested using pooled OLS estimations and two different datasets: monetary policy event dummies and the purchase volumes of the Securities Markets Programme (SMP). We find significantly negative effects on bond yield spreads for both datasets, leading us to accept the hypothesis. The results are confirmed by robustness checks that directly estimate the effect of unconventional monetary policy on central government debt.
Subjects: 
soft budget constraints
bond yield spreads
monetary policy events
securities markets programme
European Central Bank
JEL: 
F34
F37
F42
P17
P51
Document Type: 
Working Paper

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