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Asset price volatility in EU-6 economies: how large is the role played by the ECB?

Author

Listed:
  • Alessio Ciarlone

    () (Banca d'Italia)

  • Andrea Colabella

    () (Banca d'Italia)

Abstract

In this paper we provide evidence that the effects of the different waves of asset purchase programmes implemented by the ECB from 2009 onwards have spilled over into asset price volatility developments of a group of six Central and Eastern European economies belonging to the EU but not to the euro area. This has partly shielded their financial markets from the negative shocks that have influenced international investors’ degree of risk aversion in recent years. By means of a dynamic conditional correlation multivariate GARCH model, and by resorting to three different proxies to describe the functioning and measure the impact of the ECB’s asset purchase programmes, we show that such non-standard monetary measures have played a significant role in dampening volatility spikes in the financial markets of the countries at stake. This probably reflects how both a ‘risk taking’ and a ‘liquidity’ channel of transmission actually work. The results are generally robust to an extensive series of tests, and to changes made in the estimation methodology.

Suggested Citation

  • Alessio Ciarlone & Andrea Colabella, 2018. "Asset price volatility in EU-6 economies: how large is the role played by the ECB?," Temi di discussione (Economic working papers) 1175, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_1175_18
    as

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    File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2018/2018-1175/en_tema_1175.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. 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," Working Papers 2018-04, National Bank of the Republic of North Macedonia.

    More about this item

    Keywords

    unconventional monetary policy; ECB; Central and Eastern Europe; international spillovers; asset prices; volatility; GARCH models;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • 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
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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