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The effects of quantitative easing on the integration of UK capital markets

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  • James M. Steeley

Abstract

We examine the effects of quantitative easing (QE) on the volatility of and correlation between stocks, short-term bonds and long-term bonds in the UK. Using a multivariate dynamic conditional correlation generalised autoregressive conditional heteroscedasticity model, we find that volatility in each of the markets experiences a significant increase during the financial crisis that is reversed during the first phase of QE. We find limited effects of the specific occurrence or intensity of QE activity on either the volatility or correlations for these asset classes, but some evidence that volatility persistence experienced temporary shifts during the sample period. We find short-term variability in the correlations between the markets during the crisis and QE periods, but cannot reject the hypothesis that correlations were constant throughout the sample period.

Suggested Citation

  • James M. Steeley, 2017. "The effects of quantitative easing on the integration of UK capital markets," The European Journal of Finance, Taylor & Francis Journals, vol. 23(11), pages 999-1024, September.
    • Handle: RePEc:taf:eurjfi:v:23:y:2017:i:11:p:999-1024
    DOI: 10.1080/1351847X.2015.1067635
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    Cited by:

    1. Kenourgios, Dimitris & Drakonaki, Emmanouela & Dimitriou, Dimitrios, 2019. "ECB’s unconventional monetary policy and cross-financial-market correlation dynamics," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    2. Mészáros Mercédesz & Kiss Gábor Dávid, 2020. "Spillover effects of unconventional monetary policy on capital markets in the shadow of the Eurozone: A sample of non-Eurozone countries," Review of Economic Perspectives, Sciendo, vol. 20(2), pages 171-195, June.

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