We study the determinants of bond spreads of euro area sovereigns since the introduction of the euro. We show that an aggregate risk factor is a main driver of spreads. The aggregate risk factor also plays an important role for sovereign risk through its interaction with the size and structure...

Incorporating arbitrage-free term-structure dynamics into a semi-structural macro-model, we jointly estimate the real equilibrium interest rate (r*), trend inflation, and term premia for the United States and the euro area, using a Bayesian approach. The natural real rate and trend inflation are...

We examine the effects of the QE programme started by the ECB in 2015. Studying the short-term reaction of bond markets, we try to quantify different asset price channels such as the portfolio rebalance channel by running event regressions for several Euro Area countries. Our analysis suggests...

The estimation of dynamic term structure models (DTSMs) turns out to be challenging in the presence of a small sample. It is exacerbated if the sample is characterized by a prolonged period of low interest rates near a time-varying effective lower bound. These challenges all weigh heavily when...

In this paper, we employ firm-level data to analyze to what extent financing conditions of non-financial corporations in the Euro Area depend on country-specific factors, in particular the respective country's government bond yield and the share of non-performing loans to the corporate sector....

We model the dynamics of the euro area yield curve using a shadow-rate term structure model (SRTSM), with particular attention to the period since late 2011 when interest rates have been at the lowest level since the inception of EMU. The shadow rate is driven by latent factors with linear...

We trace the impact of the European Central Bank (ECB) asset purchase programme (APP) on the yield curve. Exploiting granular information on sectoral asset holdings and ECB asset purchases, we construct a novel measure of the "free-float of duration risk" borne by pricesensitive investors. We...

In light of the recent large swings in stock and housing prices accompanied by ample global liquidity, the role of monetary policy in the build-up of asset price bubbles has been questioned. This paper will contribute to the debate whether central banks can and should stronger "lean against the...

Persistent variations in the log price-to-dividend ratio (PtDR) have triggered a lively discussion in the literature. This paper proposes a present value model incorporating this persistence through a time-varying steady state of the PtDR. Log-likelihood statistics confirm that the time-varying...

Economic theory predicts that, in a small open economy, the dynamics of the real price of gold should be linked to real interest rates and the rate of change of the real exchange rate. Using data for Australia, we use a real-time forecasting approach to analyze whether real interest rates and...