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Financial crisis risk, ECB “non-standard” measures, and the external value of the euro

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  • Eichler, Stefan

Abstract

I study the impact of banking and sovereign debt crisis risk of EMU member states on the external value of the euro. Using a regime switching model, I find that the external value of the euro has significantly responded to financial crisis risk during the period of November 2008–November 2011, while no significant effect is found for the period from February 2006 to October 2008. This suggests that the monetary expansion and interest rate cuts associated with the ECB's “non-standard” measures may have reduced the external value of the euro.

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  • Eichler, Stefan, 2012. "Financial crisis risk, ECB “non-standard” measures, and the external value of the euro," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(3), pages 257-265.
    • Handle: RePEc:eee:quaeco:v:52:y:2012:i:3:p:257-265
    DOI: 10.1016/j.qref.2012.06.001
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    1. Could choppy markets see currency deal done before Scotland independence vote?
      by Bruce Morley, Lecturer in Economics at University of Bath in The Conversation on 2014-09-08 21:14:17

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    More about this item

    Keywords

    ECB; EMU; Exchange rate; Monetary policy; Regime switching model;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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