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Title: The impact of heterogeneous unconventional monetary policy on tail risks Authors:  Antoni Vaello Sebastia - University of Balearic Islands (Spain) [presenting]
Irma Alonso - Banco de Espana (Spain)
Pedro Serrano - University Carlos III of Madrid (Spain)
Abstract: The impact of unconventional monetary policies (UMPs) of four major central banks -US, Japan, Europe and UK- on market uncertainty is analyzed. We exploit the heterogeneity of different UMP actions to disentangle a differential impact of these measures on option-implied risk neutral densities. Using an event-study, the preliminary results show that the announcement of UMP generally reduces the option-implied probability of risky events across different horizons and thresholds for a given loss, suggesting that the risk-taking channel have worked in the four areas analysed. Most of the results seem to be driven by forward guidance and liquidity measures rather than asset purchases. Cross-border effects are also relevant, but they only affect larger horizons, which suggests the existence of a differential impact depending on whether there is an idiosyncratic or exogenous contribution of UMP. Finally, the dynamics of the UMP processes are captured by a SVAR using sign restrictions and differentiating between an unconventional monetary policy, demand, supply and uncertainty shock.