Munich Personal RePEc Archive

The Financial and Macroeconomic Effects of SMP, LTRO and OMT Announcements

Gifuni, Luigi (2017): The Financial and Macroeconomic Effects of SMP, LTRO and OMT Announcements.

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The term Non-Conventional Monetary Policies refers to the Central Banks and indicates the possibility that they may implement policies of extraordinary nature. The motivation behind such a move may lie in the fact that conventional policies have temporarily lost their effectiveness. The events of the financial crisis of 2007 – 2009 are a good example to explain the use of an unconventional approach by the Central Banks. Previously, the monetary policies of many countries seemed to follow the Taylor rule, according to which the Central Banks (in reference to an inflation target) varied the nominal interest rate in response to changes in inflation and GDP. The financial crisis of 2007 has led the Monetary Authorities of the major countries to no longer consider the conventional criteria on which they had always based their interventions, pushing them towards these exceptional measures. This study evaluates the macroeconomic effects of three different Non-Conventional Monetary Policies in the financial and bond markets. Securities Market Programme (SMP), Long Term Refinancing Operation (LTRO) and Outright Monetary Transaction (OMT) represent the announcements of the European Central Bank (ECB) that have been evaluated. This paper will argue that the markets examined (France, Germany, Spain and Italy) have shown significant growth in terms of real activity, credit and prices, for the SMP and OMT announcement, whereas LTRO has displayed relatively muted results.

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