The Paradigm Shift in the ECB in 2011 and its Impact on the Monetary Union

This paper provides a brief historical account of the financial crisis years and the way their impact has led to a paradigmatical change at the ECB level of monetary policy decisions. Several speeches from prominent actors inside the ECB institutional direction were analyzed and discussed. From this historiographical endeavor, I created a model seeking to analyze and explain the effects of the changes in communication stance of the ECB on the interest rate spreads for sovereign debt bonds in the euro area. To provide and empirical analysis of my hypothesis, I used the speech given by Mr. Mario Draghi on July 26th, 2012, as a proxy for this paradigm shift, as well as gathered data on real economic variables - inflation, unemployment, and financial risk measures - and direct monetary policy effects – the ECB standing facility rates. With this empirical model, I found that a dummy variable for the speech of Mr. Mario Draghi provides a strong statistical significance for the regression of the dependent variable of the interest rate spreads between Germany and euro area periphery countries – Greece, Ireland, Italy, Portugal, and Spain - sovereign debt bonds.