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Is the ECB’s conventional monetary policy state‐dependent? An event study approach
Author(s) -
Perdichizzi Salvatore,
Cotugno Matteo,
Torluccio Giuseppe
Publication year - 2022
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12393
Subject(s) - economics , interest rate , volatility (finance) , monetary economics , monetary policy , german , event study , zero lower bound , econometrics , paleontology , context (archaeology) , archaeology , biology , history
We investigate the impact of ECB conventional (CMP) on national banking indices of 10 Eurozone countries and a Eurozone‐wide banking index using the event study technique. We find that announcements of unexpected increases in interest rates benefit French, German, Greek and Italian banks when interest rates are low, while in other periods, the effect is muted. A plausible explanation is that bank profits are squeezed when interest rates are low because banks are reluctant to push deposit rates to zero. Our results are robust to potentially confounding events related to unconventional monetary policy announcements, volatility clustering and volatility expectations.