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The Impact of the ECB’s Quantitative Easing Policy on Capital Flows in the Cesee Region

Author

Listed:
  • Anita Angelovska – Bezhoska

    (National Bank of the Republic of Macedonia, Skopje, Macedonia)

  • Ana Mitreska

    (National Bank of the Republic of Macedonia, Skopje, Macedonia)

  • Sultanija Bojcheva – Terzijan

    (National Bank of the Republic of Macedonia, Skopje, Macedonia)

Abstract

This paper attempts to empirically assess the impact of the ECB’s quantitative easing policy on capital flows in the countries of the Central and South Eastern region. Given the tight trade and financial linkages of the region with the euro area, one should expect that the buoyant liquidity provided by the ECB might affect the size of the capital inflows. We test this hypothesis by employing panel estimation on a sample of 14 countries CESEE countries for the 2003-2015 period. Contrary to the expected outcome, the results reveal either negative or insignificant impact of the change in the ECB balance sheet on the different types of capital inflows. The results suggest that the magnitude of the crisis, to which the ECB responded to was immense, hence precluding any significant impact of the monetary easing on capital flows in the region. The inclusion of a dummy in the model, to control for the 2008 crisis confirms the findings from the first specification and also does not change the finding on the ECB quantitative easing impact on the capital flows. The impact of the crisis dummy on capital flows is negative and it holds for almost all types of capital inflows, except for the government debt flows, which is consistent with the countercyclical fiscal policies and rising public debt after the crisis.

Suggested Citation

  • Anita Angelovska – Bezhoska & Ana Mitreska & Sultanija Bojcheva – Terzijan, 2018. "The Impact of the ECB’s Quantitative Easing Policy on Capital Flows in the Cesee Region," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 7(2), pages 25-48.
    • Handle: RePEc:cbk:journl:v:7:y:2018:i:2:p:25-48
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    Citations

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    Cited by:

    1. 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.
    2. Ledóchowski, Michał & Żuk, Piotr, 2022. "What drives portfolio capital inflows into emerging market economies? The role of the Fed's and ECB's balance sheet policies," Emerging Markets Review, Elsevier, vol. 51(PB).
    3. Stephanos Papadamou & Nikolaos A. Kyriazis & Panayiotis G. Tzeremes, 2019. "Spillover Effects of US QE and QE Tapering on African and Middle Eastern Stock Indices," JRFM, MDPI, vol. 12(2), pages 1-20, April.

    More about this item

    Keywords

    quantitative easing polices; ECB; capital flows; CESEE countries; panel estimates; mean group estimator.;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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