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Assessing the Impact of the ECB’s Unconventional Monetary Policy on the European Stock Markets

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  • Carlos J. Rincon

    (Department of Finance and Accounting, Graduate School of Management, Saint Petersburg State University, 199004 Saint Petersburg, Russia
    Department of Finance, St. Petersburg School of Economics and Management, HSE University, 194100 Saint Petersburg, Russia)

  • Anastasiia V. Petrova

    (Department of Finance, St. Petersburg School of Economics and Management, HSE University, 194100 Saint Petersburg, Russia)

Abstract

This study assesses the effects of the European Central Bank’s (ECB) unconventional monetary policy (UMP) on the prices of selected European stock market indices during the European sovereign debt (2010–2012) and the COVID-19 pandemic (2020–2022) crises interventions. This research employs the instrumental variables (IV) two-stage least squares (2SLS) model approach to evaluate the effects of changes in the size of the ECB’s balance sheet on the pricing of key equity market indices in Europe. The results of this study suggest that the ECB’s asset value expansion had the opposite statistically significant effects on the European stock market indices’ prices between the interventions. That is, an increase in the ECB’s balance sheet size was associated with a decrease in the prices of the indices during the sovereign debt crisis and with a rise during the COVID-19 pandemic. This research pinpoints the price sensitivity of each of the European equity indices to the ECB’s UMP and determines the different outcomes of the ECB’s quantitative easing policy between the interventions.

Suggested Citation

  • Carlos J. Rincon & Anastasiia V. Petrova, 2024. "Assessing the Impact of the ECB’s Unconventional Monetary Policy on the European Stock Markets," JRFM, MDPI, vol. 17(9), pages 1-20, September.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:9:p:425-:d:1483689
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    References listed on IDEAS

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