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Spillovers from the European Central Bank's asset purchases to countries in Central and Eastern Europe

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  • Antal, Mark
  • Kaszab, Lorant

Abstract

In the aftermath of the financial crises started in 2008, policy rates reached their zero lower bound. Central banks around the world aimed to stimulate economic growth through asset purchases which boosted confidence and asset prices as well as lowered yields on sovereign bonds. Spillovers from euro area asset purchases to non-eurozone countries have been less studied in the literature. In our event study analysis using daily data 2014–2017, we find that sovereign bond yields of six Central and Eastern European countries drop by around 1–5 basis points in a two-day time window in response to the announcements of the European Central Bank. We also find that credit spreads fall and national currencies appreciate against the euro. These effects materialised through the confidence and signalling channels, which enhanced investments and raised inflation expectations, respectively.

Suggested Citation

  • Antal, Mark & Kaszab, Lorant, 2022. "Spillovers from the European Central Bank's asset purchases to countries in Central and Eastern Europe," Economic Modelling, Elsevier, vol. 113(C).
    • Handle: RePEc:eee:ecmode:v:113:y:2022:i:c:s0264999322001146
    DOI: 10.1016/j.econmod.2022.105868
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    References listed on IDEAS

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    1. Capasso, Salvatore & D'Uva, Marcella & Fiorelli, Cristiana & Napolitano, Oreste, 2023. "Cross-border Italian sovereign risk transmission in EMU countries," Economic Modelling, Elsevier, vol. 126(C).

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    More about this item

    Keywords

    Sovereign bond yield; Spillovers from euro area asset purchases; CESI uncertainty Index; Credit-default swap spread; VSTOXX volatility Index; Amundi inflation-indexed yield;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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