ECB Interventions in The Euro Area Sovereign Debt Markets as A Reaction on Debt Crisis
Journal Title: Zarządzanie i Finanse - Year 2013, Vol 11, Issue 4
Abstract
The main aim of this article is to present the idea of monetary policy transmission mechanism, debt securities markets role in the process of this transmission and analyzing interventions on debt securities markets in the pe-riod of 2010–2012. The article also presents views on legitimacy of these inter-ventions. The general mechanism of monetary policy, which influence economy and inflation is called transmission mechanism. Government bond markets play the essential role in this mechanism. They operate through three channels: the „price channel”, the „liquidity channel” and „balance sheet channel”. At the beginning of May 2010 government bond markets did not work properly. Due to this fact, the ECB decided to intervene in these markets in order to restore its appropriate functioning. The Governing Council of ECB decided to establish the Securities Markets Programme (SMP). This programme was implemented by Eurosystem portfolio managers carrying out purchases of certain euro area sovereign debt securities in secondary market interventions. These securities were purchased between May 2010 and March 2011 and between August 2011 and February 2012. With the announcement of the technical features of Outright Monetary Transactions (OMT) on 6 September 2012, the SMP was terminated. Nevertheless, OMTs were not implemented till the end of 2012. It has to be mentioned that at the programme’s peak, the Eurosystem held SMP securities for a total settlement amount of €219.5 billion. However, at the end of 2012 it was €208.7 billion. Although the purchases of sovereign debt se-curities of euro area countries in the period of 2010–2012 took place in the sec-ondary markets, the ECB played role as a lender of the last resort for these countries from which government bonds were purchased. These interventions were controversial due to its legitimacy.
Authors and Affiliations
Elżbieta Małecka, Juliusz Giżyński
Keywords
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