Activation of New ECB Emergency Program TPI Has Not Yet Been Required
| Autor: | Bernoth, Kerstin, Dietz, Sara, Ider, Gökhan, Lastra, Rosa María |
|---|---|
| Rok vydání: | 2022 |
| Předmět: |
E42 Monetary Systems
Standards Regimes Government and the Monetary System Payment Systems monetary policy transmission E52 Monetary Policy K20 Regulation and Business Law: General sovereign bond yield spreads bond market fragmentation E58 Central Banks and Their Policies E43 Interest Rates: Determination Term Structure and Effects Transmission Protection Instrument asset purchase programmes |
| DOI: | 10.18723/diw_dwr:2022-40-1 |
| Popis: | Since the beginning of 2022, monetary policy in the euro area has been gradually normalizing. As a result, bond yields of highly indebted countries such as Italy and Greece are rising more sharply than those of countries with less debt, such as Germany, a development referred to as bond market fragmentation. To ensure the coherent effectiveness of monetary policy on economic developments and, ultimately, price developments in all euro area Member States, the Governing Council of the European Central Bank announced the Transmission Protection Instrument (TPI) in July 2022. The TPI intends to make it possible to selectively purchase government bonds from countries whose interest rate increases are not considered to be justified by macroeconomic fundamentals, thus preventing a disorderly divergence in interest rate levels between countries. This Weekly Report analyzes the economic and legal aspects of this new monetary policy instrument. Estimates from the empirical model show that current yield spreads between government bonds of euro area member states cannot yet be justified as disorderly; rising yields can be explained by a worsening of macroeconomic fundamentals and stricter general risk assessments. Therefore, the requirements for activating the TPI have not yet been fulfilled. In addition, TPI raises concerns from a legal perspective. DIW Wochenbericht |
| Databáze: | OpenAIRE |
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