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ECB’s unconventional monetary policy and cross-financial-market correlation dynamics

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  • Kenourgios, Dimitris
  • Drakonaki, Emmanouela
  • Dimitriou, Dimitrios

Abstract

This paper examines the effects of the unconventional monetary policy (UMP) launched by the European Central Bank on the cross-market correlations between bond, stock and currency forward markets. Using a dynamic conditional correlation analysis and several robustness tests, we investigate possible differences on the correlation dynamics across four UMP periods and across a range of developed countries and emerging market economies. The empirical results indicate a spillover effect on both developed and emerging markets, although this impact is not identical across assets and countries. We also find that the new UMP phase started in 2014 has a more prominent impact, highlighting differences on the impact between the earlier and the new wave of UMPs and across cross-market correlations.

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  • Kenourgios, Dimitris & Drakonaki, Emmanouela & Dimitriou, Dimitrios, 2019. "ECB’s unconventional monetary policy and cross-financial-market correlation dynamics," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:ecofin:v:50:y:2019:i:c:s1062940818304856
    DOI: 10.1016/j.najef.2019.101045
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    2. Rémi Odry & Roman Mestre, 2021. "Monetary Policy and Business Cycle Synchronization in Europe," EconomiX Working Papers 2021-19, University of Paris Nanterre, EconomiX.
    3. Yip, Pick Schen & Brooks, Robert & Do, Hung Xuan & Vo, Xuan Vinh, 2022. "What drives cross-market correlations during the United States Q.E.?," International Review of Financial Analysis, Elsevier, vol. 83(C).
    4. Inoue, Tomoo & Okimoto, Tatsuyoshi, 2022. "International spillover effects of unconventional monetary policies of major central banks," International Review of Financial Analysis, Elsevier, vol. 79(C).
    5. Tomoo Inoue & Tatsuyoshi Okimoto, 2022. "How does unconventional monetary policy affect the global financial markets?," Empirical Economics, Springer, vol. 62(3), pages 1013-1036, March.
    6. Burdekin, Richard C.K. & Reckers, Dawson & Tao, Ran, 2022. "Quantifying China’s financial reach up through the pandemic: The African experience," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).
    7. Ibrahim Sameer, 2021. "Impact of corporate social responsibility on organization’s financial performance: evidence from Maldives public limited companies," Future Business Journal, Springer, vol. 7(1), pages 1-21, December.
    8. Meng, Xiangcai & Huang, Chia-Hsing, 2021. "The time-frequency analysis of conventional and unconventional monetary policy: Evidence from Japan," Japan and the World Economy, Elsevier, vol. 59(C).
    9. Xiaopeng Wang & Xiang Chen & Yiman Cheng & Luyao Zhou & Yi Li & Yongliang Yang, 2020. "Factorial Decomposition of the Energy Footprint of the Shaoxing Textile Industry," Energies, MDPI, vol. 13(7), pages 1-13, April.
    10. Mészáros Mercédesz & Kiss Gábor Dávid, 2020. "Spillover effects of unconventional monetary policy on capital markets in the shadow of the Eurozone: A sample of non-Eurozone countries," Review of Economic Perspectives, Sciendo, vol. 20(2), pages 171-195, June.
    11. Gábor Dávid Kiss & Mercédesz Mészáros, 2020. "Gravity Among Central Bank Balance Sheets: Monetary Policy Spill-Over on FX Volatility," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 5(1), pages 33-57, June.
    12. Dimitris Kenourgios & Despoina Ntaikou, 2021. "ECB’s unconventional monetary policy and bank lending supply and performance in the euro area," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(2), pages 211-224, April.

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    More about this item

    Keywords

    Unconventional monetary policy; Financial markets; Developed and emerging countries; Correlations; Wavelet analysis;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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