IDEAS home Printed from https://ideas.repec.org/a/eee/jimfin/v122y2022ics0261560621002096.html
   My bibliography  Save this article

Price effects of unconventional monetary policy announcements on European securities markets

Author

Listed:
  • Ferreira, Eurico
  • Serra, Ana Paula

Abstract

This paper assesses the effects of the unconventional monetary policies taken by the European Central Bank, the Bank of England and the Federal Reserve on European securities markets. Using the event study methodology, we evaluate the price reaction of market indices around the announcement dates from 2008 to 2018. Our results show that the impact is mixed on European government bonds, but positive and significant on stocks, with some evidence of international spillovers. We also find that coordinated policy actions exert a stronger influence than individual measures. Furthermore, the announcements generate surprise effects, albeit with a different magnitude and direction.

Suggested Citation

  • Ferreira, Eurico & Serra, Ana Paula, 2022. "Price effects of unconventional monetary policy announcements on European securities markets," Journal of International Money and Finance, Elsevier, vol. 122(C).
    • Handle: RePEc:eee:jimfin:v:122:y:2022:i:c:s0261560621002096
    DOI: 10.1016/j.jimonfin.2021.102558
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0261560621002096
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jimonfin.2021.102558?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ashoka Mody & Damiano Sandri, 2012. "The eurozone crisis: how banks and sovereigns came to be joined at the hip [‘A pyrrhic victory? Bank bailouts and sovereign credit risk’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 27(70), pages 199-230.
    2. Bowman, David & Londono, Juan M. & Sapriza, Horacio, 2015. "U.S. unconventional monetary policy and transmission to emerging market economies," Journal of International Money and Finance, Elsevier, vol. 55(C), pages 27-59.
    3. John H. Rogers & Chiara Scotti & Jonathan H. Wright, 2014. "Evaluating asset-market effects of unconventional monetary policy: a multi-country review [Uncertainty of interest rate path as a monetary policy instrument]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 29(80), pages 749-799.
    4. Georgiadis, Georgios, 2016. "Determinants of global spillovers from US monetary policy," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 41-61.
    5. Hélène Rey, 2016. "International Channels of Transmission of Monetary Policy and the Mundellian Trilemma," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(1), pages 6-35, May.
    6. Pacicco, Fausto & Vena, Luigi & Venegoni, Andrea, 2019. "Market reactions to ECB policy innovations: A cross-country analysis," Journal of International Money and Finance, Elsevier, vol. 91(C), pages 126-137.
    7. Chen, Qianying & Filardo, Andrew & He, Dong & Zhu, Feng, 2016. "Financial crisis, US unconventional monetary policy and international spillovers," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 62-81.
    8. Kuttner, Kenneth N., 2001. "Monetary policy surprises and interest rates: Evidence from the Fed funds futures market," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 523-544, June.
    9. Christina D. Romer & David H. Romer, 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 121-184, National Bureau of Economic Research, Inc.
    10. Jonathan H. Wright, 2012. "What does Monetary Policy do to Long‐term Interest Rates at the Zero Lower Bound?," Economic Journal, Royal Economic Society, vol. 122(564), pages 447-466, November.
    11. repec:oup:ecpoli:v:29:y:2014:i:80:p:749-799 is not listed on IDEAS
    12. Marcel Fratzscher & Marco Lo Duca & Roland Straub, 2016. "ECB Unconventional Monetary Policy: Market Impact and International Spillovers," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(1), pages 36-74, May.
    13. Roberto Rigobon & Brian Sack, 2003. "Measuring The Reaction of Monetary Policy to the Stock Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(2), pages 639-669.
    14. Neely, Christopher J., 2015. "Unconventional monetary policy had large international effects," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 101-111.
    15. Fiordelisi, Franco & Galloppo, Giuseppe & Ricci, Ornella, 2014. "The effect of monetary policy interventions on interbank markets, equity indices and G-SIFIs during financial crisis," Journal of Financial Stability, Elsevier, vol. 11(C), pages 49-61.
    16. Abbassi, Puriya & Linzert, Tobias, 2012. "The effectiveness of monetary policy in steering money market rates during the financial crisis," Journal of Macroeconomics, Elsevier, vol. 34(4), pages 945-954.
    17. Michael A. S. Joyce & Ana Lasaosa & Ibrahim Stevens & Matthew Tong, 2011. "The Financial Market Impact of Quantitative Easing in the United Kingdom," International Journal of Central Banking, International Journal of Central Banking, vol. 7(3), pages 113-161, September.
    18. Viral V Acharya & Tim Eisert & Christian Eufinger & Christian Hirsch, 2019. "Whatever It Takes: The Real Effects of Unconventional Monetary Policy," Review of Financial Studies, Society for Financial Studies, vol. 32(9), pages 3366-3411.
    19. Francis Breedon & Jagjit S Chadha & Alex Waters, 2012. "The financial market impact of UK quantitative easing," BIS Papers chapters, in: Bank for International Settlements (ed.), Threat of fiscal dominance?, volume 65, pages 277-304, Bank for International Settlements.
    20. Francis Breedon & Jagjit S. Chadha & Alex Waters, 2012. "The financial market impact of UK quantitative easing," Oxford Review of Economic Policy, Oxford University Press, vol. 28(4), pages 702-728, WINTER.
    21. Christina D. Romer & David H. Romer, 2004. "A New Measure of Monetary Shocks: Derivation and Implications," American Economic Review, American Economic Association, vol. 94(4), pages 1055-1084, September.
    22. Kerstin Bernoth & Jürgen von Hagen, 2004. "The Euribor Futures Market: Efficiency and the Impact of ECB Policy Announcements," International Finance, Wiley Blackwell, vol. 7(1), pages 1-24, March.
    23. Falagiarda, Matteo & Reitz, Stefan, 2015. "Announcements of ECB unconventional programs: Implications for the sovereign spreads of stressed euro area countries," Journal of International Money and Finance, Elsevier, vol. 53(C), pages 276-295.
    24. Mamaysky, Harry, 2018. "The time horizon of price responses to quantitative easing," Journal of Banking & Finance, Elsevier, vol. 90(C), pages 32-49.
    25. Haitsma, Reinder & Unalmis, Deren & de Haan, Jakob, 2016. "The impact of the ECB's conventional and unconventional monetary policies on stock markets," Journal of Macroeconomics, Elsevier, vol. 48(C), pages 101-116.
    26. Brett W. Fawley & Christopher J. Neely, 2013. "Four stories of quantitative easing," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 51-88.
    27. Filbien, Jean-Yves & Labondance, Fabien, 2013. "Do financial markets learn from ECB monetary policy?," Economics Letters, Elsevier, vol. 120(2), pages 271-275.
    28. Bernhard, Severin & Ebner, Till, 2017. "Cross-border spillover effects of unconventional monetary policies on Swiss asset prices," Journal of International Money and Finance, Elsevier, vol. 75(C), pages 109-127.
    29. French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, vol. 19(1), pages 3-29, September.
    30. repec:oup:ecpoli:v:27:y:2012:i:70:p:199-230 is not listed on IDEAS
    31. Jäger, Jannik & Grigoriadis, Theocharis, 2017. "The effectiveness of the ECB’s unconventional monetary policy: Comparative evidence from crisis and non-crisis Euro-area countries," Journal of International Money and Finance, Elsevier, vol. 78(C), pages 21-43.
    32. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    33. Ricci, Ornella, 2015. "The impact of monetary policy announcements on the stock price of large European banks during the financial crisis," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 245-255.
    34. Lutz Kilian, 1998. "Small-Sample Confidence Intervals For Impulse Response Functions," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 218-230, May.
    35. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mansur Abdurakhmanov, 2023. "Modelling the Effect of Bank of Russia Key Rate Forecasts on Market Participants’ Expectations," Russian Journal of Money and Finance, Bank of Russia, vol. 82(2), pages 3-20, June.
    2. Gnabo, Jean-Yves & Soudant, Joey, 2022. "Monetary policy and portfolio rebalancing: Evidence from European equity mutual funds," Journal of Financial Stability, Elsevier, vol. 63(C).
    3. Sleibi, Yacoub & Casalin, Fabrizio & Fazio, Giorgio, 2023. "Unconventional monetary policies and credit co-movement in the Eurozone," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 85(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bernhard, Severin & Ebner, Till, 2017. "Cross-border spillover effects of unconventional monetary policies on Swiss asset prices," Journal of International Money and Finance, Elsevier, vol. 75(C), pages 109-127.
    2. Pacicco, Fausto & Vena, Luigi & Venegoni, Andrea, 2019. "Market reactions to ECB policy innovations: A cross-country analysis," Journal of International Money and Finance, Elsevier, vol. 91(C), pages 126-137.
    3. İshak Demi̇r & Burak A. Eroğlu & Seçi̇l Yildirim‐Karaman, 2022. "Heterogeneous Effects of Unconventional Monetary Policy on the Bond Yields across the Euro Area," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(5), pages 1425-1457, August.
    4. Eurico Ferreira, 2019. "ECB, BoE and Fed Monetary-Policy announcements: price and volume effects on European securities markets," Working Papers w201914, Banco de Portugal, Economics and Research Department.
    5. Koráb, Petr & Saadaoui Mallek, Ray & Dibooglu, Sel, 2021. "Effects of quantitative easing on firm performance in the euro area," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    6. Claus, Edda & Claus, Iris & Krippner, Leo, 2018. "Asset market responses to conventional and unconventional monetary policy shocks in the United States," Journal of Banking & Finance, Elsevier, vol. 97(C), pages 270-282.
    7. Grahame Johnson & Sharon Kozicki & Romanos Priftis & Lena Suchanek & Jonathan Witmer & Jing Yang, 2020. "Implementation and Effectiveness of Extended Monetary Policy Tools: Lessons from the Literature," Discussion Papers 2020-16, Bank of Canada.
    8. Haitsma, Reinder & Unalmis, Deren & de Haan, Jakob, 2016. "The impact of the ECB's conventional and unconventional monetary policies on stock markets," Journal of Macroeconomics, Elsevier, vol. 48(C), pages 101-116.
    9. Martien Lamers & Frederik Mergaerts & Elien Meuleman & Rudi Vander Vennet, 2019. "The Tradeoff between Monetary Policy and Bank Stability," International Journal of Central Banking, International Journal of Central Banking, vol. 15(2), pages 1-42, June.
    10. Gustavo Adler & Carolina Osorio Buitron, 2020. "Tipping the scale? The workings of monetary policy through trade," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 744-759, August.
    11. Farinha, Jorge Bento & Vidrago, José, 2021. "The impact of the ECB's asset purchase programme on core and peripheral sovereign yields and its transmission channels," The Journal of Economic Asymmetries, Elsevier, vol. 24(C).
    12. Carlo Rosa, 2012. "How "unconventional" are large-scale asset purchases? The impact of monetary policy on asset prices," Staff Reports 560, Federal Reserve Bank of New York.
    13. Farinha, Jorge Bento & Vidrago, José, 2021. "The impact of the ECB’s asset purchase programme on euro area equities," The Quarterly Review of Economics and Finance, Elsevier, vol. 82(C), pages 270-279.
    14. Nikolaos Petrakis & Christos Lemonakis & Christos Floros & Constantin Zopounidis, 2022. "Greek Banking Sector Stock Reaction to ECB’s Monetary Policy Interventions," JRFM, MDPI, vol. 15(10), pages 1-19, October.
    15. Carlo Rosa & Giovanni Verga, 2006. "The Impact of Central Bank Announcements on Asset Prices in Real Time: Testing the Efficiency of the Euribor Futures Market," CEP Discussion Papers dp0764, Centre for Economic Performance, LSE.
    16. Jonathan Kearns & Andreas Schrimpf & Dora Xia, 2018. "Explaining Monetary Spillovers: The Matrix Reloaded," BIS Working Papers 757, Bank for International Settlements.
    17. Salvatore Perdichizzi & Matteo Cotugno & Giuseppe Torluccio, 2022. "Is the ECB’s conventional monetary policy state‐dependent? An event study approach," Manchester School, University of Manchester, vol. 90(2), pages 213-236, March.
    18. Cezar, Rafael & Silvestrini, Maéva, 2021. "Impact of the ECB Quantitative Easing on the International Investment Position," International Economics, Elsevier, vol. 165(C), pages 241-263.
    19. Anaya, Pablo & Hachula, Michael & Offermanns, Christian J., 2017. "Spillovers of U.S. unconventional monetary policy to emerging markets: The role of capital flows," Journal of International Money and Finance, Elsevier, vol. 73(PB), pages 275-295.
    20. Saroj Bhattarai & Christopher J. Neely, 2022. "An Analysis of the Literature on International Unconventional Monetary Policy," Journal of Economic Literature, American Economic Association, vol. 60(2), pages 527-597, June.

    More about this item

    Keywords

    Unconventional monetary policies; Event study tests; Surprises; Bond markets; Stock markets;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jimfin:v:122:y:2022:i:c:s0261560621002096. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30443 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.