Empirical Economics

, Volume 57, Issue 3, pp 991–1021 | Cite as

Restoring euro area monetary transmission: Which role for government bond rates?

  • Nikolay Hristov
  • Oliver Hülsewig
  • Thomas Siemsen
  • Timo WollmershäuserEmail author


For a number of euro area periphery countries, this paper explores the stability of the link between bank lending rates and yields on sovereign bonds. A stable relationship between these interest rates is important for the ECB’s attempt to restore monetary policy transmission by conducting unconventional measures that aim at bringing down government bond rates. Using vector autoregressive models with time-varying parameters, we find that bank lending rates adjusted incompletely to changes in government bond rates before the onset of the financial crisis, while their responsiveness has even further weakened thereafter. Thus, our results suggest that periphery bank lending rates have not only decoupled from policy rates after mid-2008, but also from yields on sovereign bonds.


ECB Unconventional monetary policy Euro area crisis Interest rate link Time-varying parameter vector autoregressive models 

JEL Classification

E42 E43 E44 E58 E63 


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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  • Nikolay Hristov
    • 1
  • Oliver Hülsewig
    • 1
    • 2
  • Thomas Siemsen
    • 3
  • Timo Wollmershäuser
    • 1
    • 4
    Email author
  1. 1.CESifoMunichGermany
  2. 2.Munich University of Applied SciencesMunichGermany
  3. 3.Ludwigs-Maximilians-University MunichMunichGermany
  4. 4.ifo Institute for Economic ResearchMunichGermany

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