Central Bank Communication and the Yield Curve

66 Pages Posted: 22 Nov 2016 Last revised: 2 Nov 2018

See all articles by Matteo Leombroni

Matteo Leombroni

Stanford University

Andrea Vedolin

Boston University - Department of Finance & Economics

Gyuri Venter

Copenhagen Business School

Paul Whelan

Copenhagen Business School

Multiple version iconThere are 2 versions of this paper

Date Written: October 31, 2018


Using the institutional features of ECB monetary policy announcements, we provide evidence for the risk premium channel of central bank communication. While central bank communication had a homogeneous effect across Euro-area sovereign bond yields before the European debt crisis, it drove a wedge between peripheral and core yields afterwards. Guided by the predictions of a theoretical model in which central bank communication reveals information about the state of the economy, we empirically link the periphery-core wedge to break-up and credit risk premia, and show that equity response to shocks can identify the strength of this risk premium channel.

Keywords: interest rates, monetary policy, central bank communication, risk premia, Eurozone

JEL Classification: E43, E58, G12

Suggested Citation

Leombroni, Matteo and Vedolin, Andrea and Venter, Gyuri and Whelan, Paul, Central Bank Communication and the Yield Curve (October 31, 2018). Available at SSRN: https://ssrn.com/abstract=2873091 or http://dx.doi.org/10.2139/ssrn.2873091

Matteo Leombroni

Stanford University ( email )

Stanford, CA 94305
United States

Andrea Vedolin

Boston University - Department of Finance & Economics ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Gyuri Venter (Contact Author)

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg, 2000

HOME PAGE: http://sites.google.com/site/gyuriventer/

Paul Whelan

Copenhagen Business School ( email )

Copenhagen Business School
Finance Department
Copenhagen, DC 1854

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