Direkt zum Inhalt

Activation of New ECB Emergency Program TPI Has Not Yet Been Required

DIW Weekly Report 40 / 2022, S. 249-256

Kerstin Bernoth, Sara Dietz, Gökhan Ider, Rosa María Lastra

get_appDownload (PDF  0.74 MB)

get_appGesamtausgabe/ Whole Issue (PDF  2.34 MB - barrierefrei / universal access)


Since the beginning of 2022, monetary policy in the euro area has been gradually normalizing. As a result, bond yields of highly indebted countries such as Italy and Greece are rising more sharply than those of countries with less debt, such as Germany, a development referred to as bond market fragmentation. To ensure the coherent effectiveness of monetary policy on economic developments and, ultimately, price developments in all euro area Member States, the Governing Council of the European Central Bank announced the Transmission Protection Instrument (TPI) in July 2022. The TPI intends to make it possible to selectively purchase government bonds from countries whose interest rate increases are not considered to be justified by macroeconomic fundamentals, thus preventing a disorderly divergence in interest rate levels between countries. This Weekly Report analyzes the economic and legal aspects of this new monetary policy instrument. Estimates from the empirical model show that current yield spreads between government bonds of euro area member states cannot yet be justified as disorderly; rising yields can be explained by a worsening of macroeconomic fundamentals and stricter general risk assessments. Therefore, the requirements for activating the TPI have not yet been fulfilled. In addition, TPI raises concerns from a legal perspective.

Gökhan Ider

Ph.D. Student in the Macroeconomics Department

Kerstin Bernoth

Vice Dean of Graduate Studies in the Graduate Center

JEL-Classification: E42;E43;E52;E58;K20
Keywords: monetary policy transmission, asset purchase programmes, sovereign bond yield spreads, bond market fragmentation, Transmission Protection Instrument, bond market fragmentation

Frei zugängliche Version: (econstor)