tag:blogger.com,1999:blog-4360130099110594711.post8694702993393488381..comments2022-11-30T14:01:36.523-05:00Comments on Ante Hoc: Three-Year LTRO - Claiming Undue Credit Unknownnoreply@blogger.comBlogger5125tag:blogger.com,1999:blog-4360130099110594711.post-17697190033196728092013-06-11T11:02:27.275-04:002013-06-11T11:02:27.275-04:00To play devil's advocate: Even mere talk by Dr...To play devil's advocate: Even mere talk by Draghi can move prices. Just like government change per se can move prices. But neither Draghi talk nor changing personnel or who is the prime minister changes anything real, it is the actions that markets expect that will be taken that matter. So if Draghi says something markets adjust expectations (of future monetary policy) and thus prices, if identity of prime minister changes markets adjust expectations (of future fiscal policy) and thus prices.<br />Just saying that this was meaningless is simply not enough in the context of macro. All these prices are much more dependent on expectations about future actions, than about past actions themselves.<br />So you may very well be correct, but unfortunately your arguments/evidence are too weak to conclude that the ECB takes undue credit.......Quite unfortunate. Work harder :-)<br /> Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4360130099110594711.post-18128805335002840272013-06-09T09:22:29.332-04:002013-06-09T09:22:29.332-04:00Its not cherry picking as the spread widened furth...Its not cherry picking as the spread widened further to Spain's detriment after March 1. You raise a good point about showing the Spain/Italy spread over the time - perhaps we can address that in a later post. <br /><br />Still - the question remains whether a meaningful government change in Italy or a central bank refinancing operation with no economic substance was more likely to have caused the spread decline. Willnoreply@blogger.comtag:blogger.com,1999:blog-4360130099110594711.post-5778296810180690902013-06-06T15:52:01.291-04:002013-06-06T15:52:01.291-04:00Well March 1, 2012 isn't in your graph above. ...Well March 1, 2012 isn't in your graph above. That seems like cherry-picking data.<br /><br />It seems to me your original argument was that the forming of the Monti government caused Italian yields to drop quickly, in a matter of weeks, not months (see your graph).<br /><br />Another way to put this: Why don't you draw the Italy - Spain spread in the above graph? Then we can easily see whether it falls or not after new Italian government announced. If that spread stays constant or even widens that would be evidence against your argument about the true cause of the decline in Italian yields.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4360130099110594711.post-65941262016244911942013-06-06T15:30:38.805-04:002013-06-06T15:30:38.805-04:00Great question - the spread in the 3-year was Ital...Great question - the spread in the 3-year was Italy +100 basis points on October 1, 2011. It was Italy +270 bps on November 7 but by March 1, 2012 the same spread was 0 bps. Willnoreply@blogger.comtag:blogger.com,1999:blog-4360130099110594711.post-87518360347812854902013-06-06T15:16:45.940-04:002013-06-06T15:16:45.940-04:00So what is your explanation for the similar, almos...So what is your explanation for the similar, almost parallel development of Spanish yields? While one can imagine some benefit from radical change of Italian government for Spain, why would they move so much in tandem? Shouldn't the gap between Italian and Spanish yields have narrowed after Italian government change?Anonymousnoreply@blogger.com