Echoes of intervention: monetary policy and the eurozone yield curve under stress

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School of Business | Bachelor's thesis
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Date

2025

Department

Mikkelin kampus

Major/Subject

Mcode

Degree programme

(Mikkeli) Bachelor’s Program in International Business

Language

en

Pages

45

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Abstract

This thesis investigates the impact of monetary policy interventions by the European Central Bank on the yield curve during the Global Financial Crisis and European Sovereign Debt Crisis. Using a combination of event studies, regression analysis, principal component analysis (PCA), and shadow rate models. This study examines the effectiveness of both conventional and unconventional monetary policy tools in influencing bond yields across maturities. While initial tests on event-based announcements show limited immediate impact, the shadow rate analysis reveals a stronger relationship between cumulative policy stance and yield movements, particularly at the short and long ends of the curve. The research highlights that markets react more to persistent policy signals than to isolated events, with unconventional measures proving crucial in mitigating credit spreads and stabilizing market expectations. The findings underline the complexity of monetary transmission during crises, revealing segmented market responses and emphasizing the importance of credibility and consistency in central bank policy. These insights provide valuable implications for monetary authorities operating in heterogeneous monetary unions, as well as for international businesses navigating fragmented financial environments.

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Thesis advisor

Decker, Christopher

Keywords

yield curve, monetary policy, financial crisis, shadow rate, European Central Bank, principal component analysis

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https://urn.fi/URN:NBN:fi:aalto-202505113603

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[kand] Kauppakorkeakoulu / BIZ