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ECB unconventional monetary policy and volatile bank flows: Spillover effects on emerging market economies

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  • Ouerk, Salima

Abstract

This paper analyses whether European Central Bank (ECB) unconventional monetary policy (UMP) shocks contribute to the emergence of the global financial cycle. Using large-scale global VAR models, I assessed the possible effects of ECB UMP on financial and macroeconomic conditions in emerging markets and documented the channels through which potential spillovers occur, focusing on cross-border banking flows. I found that ECB UMP influences decisions made in the euro area (EA) banking system, leading to an increase in banking outflows. In turn, the rise of inflows to emerging market economies (EMEs) results in a significant response by financial variables, proving that ECB UMP is a driver of the financial conditions in EMEs. While these results represent general trends, there is evidence of cross-regional heterogeneity.

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  • Ouerk, Salima, 2023. "ECB unconventional monetary policy and volatile bank flows: Spillover effects on emerging market economies," International Economics, Elsevier, vol. 173(C), pages 175-211.
    • Handle: RePEc:eee:inteco:v:173:y:2023:i:c:p:175-211
    DOI: 10.1016/j.inteco.2022.11.008
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    More about this item

    Keywords

    Unconventional monetary policy spillovers; Shadow short rate; International banking flows; Global financial cycle; Global VAR;
    All these keywords.

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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