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International liquidity and the European sovereign debt crisis: Was euro area unconventional monetary policy successful?

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  • Everett, Mary M.

Abstract

Using novel data on individual euro area bank balance sheets this paper shows that exposure to stressed European sovereigns is associated with a contraction in international funding. The loan component of euro area bank asset portfolios is most adversely affected by this decline in international liquidity. Controlling for bank risk and credit demand, during the sovereign debt crisis credit supply to households declined less for non-stressed country banks, with relatively greater exposure to stressed sovereigns, and that accessed the ECB's unconventional monetary policy measures in the form of the first 3-year Long-Term Refinancing Operations (VLTROs) in December 2011. In contrast, the VLTROs in February 2012 were not effective in mitigating the effect of the European sovereign debt crisis on private non-financial sector credit supply.

Suggested Citation

  • Everett, Mary M., 2015. "International liquidity and the European sovereign debt crisis: Was euro area unconventional monetary policy successful?," HIT-REFINED Working Paper Series 23, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:remfce:23
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/27312/wp023.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    European sovereign crisis; cross-border banking; international shock transmission; unconventional monetary policy; ECB liquidity;
    All these keywords.

    JEL classification:

    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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