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Global financial market impact of the announcement of the ECB's asset purchase programme

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  • Georgiadis, Georgios
  • Gräb, Johannes

Abstract

We estimate the announcement effects of the ECB's asset purchase programme (APP) on the euro exchange rate, global equity prices and bond yields. We find that the APP announcement caused a broad-based depreciation of the euro by signalling that the ECB's future monetary policy stance will remain accommodative. At the same time, the APP announcement boosted equity prices around the world by supporting investor confidence and reducing the risk of deflation and persistent stagnation in the euro area. Exchange rates appreciated more strongly vis-à-vis the euro in response to APP-related news for countries which are more integrated with the rest of the world overall, which exhibit less bilateral trade and financial integration with the euro area, which are under a more flexible exchange rate regime, and which are perceived to be more risky. Finally, we do not find any evidence that the APP announcement led to an increase in portfolios flows to emerging market economies. Quite the opposite, the ECB's APP seems to have induced a re-balancing by global investors out of emerging into advanced economies’ financial markets.

Suggested Citation

  • Georgiadis, Georgios & Gräb, Johannes, 2016. "Global financial market impact of the announcement of the ECB's asset purchase programme," Journal of Financial Stability, Elsevier, vol. 26(C), pages 257-265.
  • Handle: RePEc:eee:finsta:v:26:y:2016:i:c:p:257-265
    DOI: 10.1016/j.jfs.2016.07.009
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    Citations

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    Cited by:

    1. de Vette, Nander & Petersen, Annelie & Stan Olijslager, Stan & van Wijnbergen, Sweder, 2018. "What Option Prices tell us about the ECB's Unconventional Monetary Policies," CEPR Discussion Papers 13371, C.E.P.R. Discussion Papers.
    2. Paul Wohlfarth, 2018. "Measuring the Impact of Monetary Policy Attention on Global Asset Volatility Using Search Data," Birkbeck Working Papers in Economics and Finance 1803, Birkbeck, Department of Economics, Mathematics & Statistics.
    3. repec:eee:finsta:v:36:y:2018:i:c:p:336-345 is not listed on IDEAS
    4. repec:eee:ecolet:v:173:y:2018:i:c:p:15-18 is not listed on IDEAS
    5. Bubeck, Johannes & Habib, Maurizio Michael & Manganelli, Simone, 2018. "The portfolio of euro area fund investors and ECB monetary policy announcements," Journal of International Money and Finance, Elsevier, vol. 89(C), pages 103-126.
    6. Ralf Fendel & Frederik Neugebauer, 2018. "Country-Specific Euro Area Government Bond Yield Reactions to ECB’s Non-Standard Monetary Policy Announcements," WHU Working Paper Series - Economics Group 18-02, WHU - Otto Beisheim School of Management.
    7. repec:gam:jjrfmx:v:12:y:2019:i:2:p:57-:d:220488 is not listed on IDEAS
    8. Bergant, Katharina & Fidora, Michael & Schmitz, Martin, 2018. "International capital flows at the security level – evidence from the ECB’s asset purchase programme," ECMI Papers 13926, Centre for European Policy Studies.
    9. R.J. Galema & S. Lugo, 2017. "When central banks buy corporate bonds: : Target selection and impact of the European Corporate Sector Purchase Program," Working Papers 17-16, Utrecht School of Economics.
    10. Fernando Avalos & Emmanuel C Mamatzakis, 2018. "Euro area unconventional monetary policy and bank resilience," BIS Working Papers 754, Bank for International Settlements.
    11. Ryan van Lamoen & Simona Mattheussens & Martijn Dröes, 2017. "Quantitative easing and exuberance in government bond markets: Evidence from the ECB's expanded asset purchase program," DNB Working Papers 548, Netherlands Central Bank, Research Department.
    12. Machiel van Dijk & Andrei Dubovik, 2018. "Effects of Unconventional Monetary Policy on European Corporate Credit," CPB Discussion Paper 372, CPB Netherlands Bureau for Economic Policy Analysis.
    13. repec:eco:journ2:2018-03-17 is not listed on IDEAS
    14. Martijn (M.I.) Droes & Ryan van Lamoen & Simona Mattheussens, 2017. "Quantitative Easing and Exuberance in Government Bond Markets: Evidence from the ECB's Expanded Assets Purchase Program," Tinbergen Institute Discussion Papers 17-080/IV, Tinbergen Institute.
    15. repec:eee:jimfin:v:75:y:2017:i:c:p:14-31 is not listed on IDEAS

    More about this item

    Keywords

    Asset purchase programme; Unconventional monetary policy; Spillovers; Event study regression;

    JEL classification:

    • 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
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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