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Assessing the Effects of the Global Financial Cycle on Eurozone's Financial Stress: Does the Quantitative Easing Matter?

Author

Listed:
  • Costas Karfakis

    (Department of Economics, University of Macedonia)

  • Ioannis Karfakis

    (Business Discipline, London School of Science and Technology, Memo House, London, England, W3 0XA, UK)

Abstract

This paper examines whether the expanded Quantitative Easing policies of the European Central Bank during the period 2015-2022 have influenced the impact of the Global Financial Cycle (GFC) on the Eurozone’s financial stress. The threshold regression reveals that these policies implementation has reduced the impact of GFC on financial stress in the post-2015 period, and thus contributed to lower systemic risk. The impulse responses of the quantile regression show that a global risk aversion shock does not have persistent effects on the financial stress distribution, and thus the GFC would not “set the tone†of Eurozone's financial conditions.

Suggested Citation

  • Costas Karfakis & Ioannis Karfakis, 2024. "Assessing the Effects of the Global Financial Cycle on Eurozone's Financial Stress: Does the Quantitative Easing Matter?," Discussion Paper Series 2024_01, Department of Economics, University of Macedonia, revised Jan 2024.
    • Handle: RePEc:mcd:mcddps:2024_01
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    References listed on IDEAS

    as
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    2. Rey, Hélène, 2015. "Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence," CEPR Discussion Papers 10591, C.E.P.R. Discussion Papers.
    3. Abhishek Kumar & Sushanta Mallick & Madhusudan Mohanty & Fabrizio Zampolli, 2023. "Market Volatility, Monetary Policy and the Term Premium," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 85(1), pages 208-237, February.
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    More about this item

    Keywords

    Quantitative easing; financial stress; global financial cycle; systemic risk; balance sheet; threshold regression; quantile regression analysis;
    All these keywords.

    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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