Our non-standard measures of negative interest rate policy and asset purchases brought down the overall level of the yield curve to a region that is, by definition, unreachable under a zero lower bound and contributed to a considerable flattening of the term structure. The lowering and flattening of the yield curve in turn eased financing conditions for non-financial corporations and households, contributed to spurring economic activity and helped bring inflation closer towards our aim. From an analytical perspective, further study of the impact of innovative monetary policy measures is a necessity for central bankers and an opportunity for academics. While academic researchers have the  privilege of being able to watch new policy measures unfold before scrutinising their impact, central bank researchers and decision-makers have to monitor the impact of policy in real time, and are forced to rely on sparse empirical evidence, especially if the policy measure is unprecedented. There are many open issues regarding the interplay between the yield curve and monetary policy that require further research in my view. So let me finish with a little wish list or research agenda. First on the list should be a better understanding of the role of term premia in macroeconomic models. This includes a more thorough analysis of the transmission of quantitative easing through the duration channel, but also, more generally, a better integration of long-term rates in the transmission mechanism as formalised in DSGE models. [34] Second is an improved modelling of long-term trends.
Euro area (as of 1999) and German (before 1999) recessions are identified, respectively, by the CEPR and the Economic Cycle Research Institute (ECRI), with the exception of the German recession at the beginning of the 1970s identified by the OECD composite leading indicators. Latest observation: October 2019. At the same time, despite the unprecedented low level of the yield curve, the fact that the slope of the euro area yield curve is fairly flat (but slightly positive) is not at all unusual from a historical perspective (see Chart 2). [5] The yield curve is a central element in the transmission of monetary policy. Standard and non-standard monetary policy instruments affect the whole of the term structure, which in turn is a key determinant of the financing conditions of the economy. Some rates in the euro area economy – such as corporate bond rates or mortgage loan rates – are based on longer-term risk-free yields, while others – such as bank loan rates for firms – are mostly priced off shorter maturities. [6] The financing conditions prevailing for firms and households in turn affect the level of economic activity and inflation. While current monetary policy is an important factor affecting the yield curve, beliefs about future monetary policy and risk premia also play a role. In turn, these depend on a host of factors which determine the inflation or growth outlook of market participants and the evolution of risk premia.