Policy complementarity: major fiscal and monetary announcements during the pandemic

This paper evaluates the impact of major European fiscal and monetary policy announcements during the pandemic. Applying an event study methodology, we find that the fiscal-monetary policy-mix announcements are associated with more stable bond markets across the entire EU. Proof of positive spillover transmission, policy announcements tend to stabilize spreads even in CEE countries without EMU membership. The results indicate a high degree of complementarity between fiscal and monetary policy: well-timed fiscal policy announcements complemented ECB's monetary programs, protecting sovereign bond market from risk aversion.