Spillover Effects from the ECB‘s Unconventional Monetary Policies: The Case of Denmark, Norway and Sweden

Abstract

Using event-study techniques we investigate the impact of ECB’s announcements of nonstandard policy measures on a broad range of financial assets from Denmark, Norway and Sweden. We find evidence that unconventional monetary policy announcements by the ECB resulted in pronounced spillovers to Denmark, Norway and Sweden. In particular, our results suggest that medium- and long-term government bond yields, corporate bond yields and CDS spreads were affected by ECB’s announcements of non-standard policy measures. Our empirical results indicate that the portfolio rebalancing channel played an important role in the transmission of ECB’s non-standard policy measures on mediumand long-term government bonds and corporate bond yields. However, it also seems that declining government bond yields transmitted to decreasing corporate bond yields. Moreover, our results suggest that benchmark stock market indices and exchange rates vis-A -vis the euro were mainly unaffected by ECB’s announcements of unconventional monetary policies. Furthermore, we find pronounced spillover effects from Forward Guidance statements, Securities Markets Programme announcements, and Corporate Sector Purchase Programme announcements on financial assets from Denmark, Norway and Sweden. Though, our results highly depend on the monetary policy surprise measure used in our regressions and the degree of policy anticipationKeywords: Budgetary Policy, Capital Taxation Rate, Consumption Taxation Rate, DSGE Model, Labor Taxation Rate, Wages Rigidity