Integration of Government Bond Market in the Euro Area and Monetary Policy
| Autor: | Velimir Lukić |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2016 |
| Předmět: |
Market integration
Economics and Econometrics Strategy and Management f36 Monetary economics central bank asset purchases sovereign debt 0502 economics and business Economics ddc:330 050207 economics E58 G12 bond markets integration E52 050208 finance Lender of last resort HG1501-3550 F36 Bond 05 social sciences Monetary policy yield spread Exceptional circumstances International economics Bond market index Banking crisis Government bond Bond market e58 g12 e52 Finance |
| Zdroj: | Journal of Central Banking Theory and Practice, Vol 5, Iss 1, Pp 71-97 (2016) |
| Popis: | This paper combines analysis of evolution in euro area government bond market integration and interference of European Central Bank with functioning of respective market recently. Since the introduction of euro, government bond yields converged in the euro area, bonds of different countries have become close substitutes in the perception of investors, and overall integration of the market was rather high. At the end of 2008, dramatic shift occurred and ever since disintegrative forces were set in motion. The paper presents the following measures of integration of the government bond markets: yield spreads, dispersion in yield spreads and beta coefficient. All three measures suggest unprecedented market disintegration as of 2010. The paper highlighted relevance of sovereign bond market for the smooth functioning of the monetary policy transmission mechanism in a monetary union context. Three ECB’s programmes aimed at sovereign debt crisis resolution were analysed in details. They proved successful in lowering peripheral countries’ yields and spreads, and calming the markets. If one takes central bank function of the lender of last resort for banks, then these programmes may be viewed as the “buyer of last resort” device for government bonds. Although warranted by exceptional circumstances and need for swift response, a due caution should be paid to these programmes since they pose certain challenges for conduct of monetary policy and might even have unintended consequences. |
| Databáze: | OpenAIRE |
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