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Fundamentals versus market sentiments in the euro bond markets: implications for QE

de Grauwe, Paul, Ji, Yuemei and Macchiarelli, Corrado (2017) Fundamentals versus market sentiments in the euro bond markets: implications for QE. SRC Special Paper Series (No 12). Systemic Risk Centre, The London School of Economics and Political Science, London, UK.

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Despite the partial realignment of European long-term government bonds after the crisis in 2012, there has been some renewed divergence in yields in the last years. We analyse the sources of these divergences and find that the government bond markets in the Eurozone are highly sensitive to changing market sentiments, both in time and across countries. We analyse the implications of this finding for the QE-programme. Our analysis of the recent developments in the bond markets and in the macroeconomic developments of the euro area suggests that pulling the plug on QE too soon might undo some of the benefits of QE in the countries of the periphery and may lead to increases in the refinancing costs of member states with little or no fiscal space

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2017 The Authors
Divisions: Systemic Risk Centre
Subjects: H Social Sciences > HG Finance
Sets: Research centres and groups > Systemic Risk Centre
Date Deposited: 07 Nov 2017 14:55
Last Modified: 08 Jun 2020 23:12
Projects: ES/K002309/1
Funders: Economic and Social Research Council

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