RESUMO
We use event study regressions to compare the impact of monetary versus fiscal policy announcements on euro area government bond spreads in the unfolding Covid-19 pandemic. Throughout our specifications and robustness checks, we detect larger effects for monetary than for fiscal announcements. Among monetary policy instruments, the PEPP has the largest spread compressing effects. Comparing the announcement effects for fiscal crisis tools, Next Generation EU shows significant results in contrast to news on pure loan instruments. The relaxation of European fiscal rules through the activation of the emergency-escape clause under the Stability and Growth Pact is associated with rising spreads. We conclude that the stability of euro area bond markets in the presence of a severe solvency shock depends to a large extent on the Eurosystem's unconstrained sovereign bond purchases. Our results suggest that fiscal support can play a stabilizing role if it includes, like Next Generation EU, a significant transfer component.
RESUMO
We study the political economy of allocation decisions within a major state investment bank. Our focus is the European Investment Bank (EIB) - "The Bank of the EU" - which is the largest multilateral lending (and borrowing) institution in the world. We study the behavior of about 500 national representatives at the EIB's Board of Directors - the bank's decisive body for loan approvals - and show that a representative's appointment increases the probability that the sub-national region where she works receives a loan by about 17 percentage points. This "home-bias" effect is driven by large loans financing infrastructure projects. We discuss several pieces of evidence, which are consistent with the hypothesis that this home-bias lending may be due to favoritism, however, we cannot conclusively demonstrate this case of resource misallocation.