The financial market effects of the ECB's asset purchase programs
Vivien Lewis () and
Markus Roth ()
Journal of Financial Stability, 2019, vol. 43, issue C, 40-52
The European Central Bank's asset purchase programs, while intended to stabilize the economy, may have unintended side effects on financial stability. This paper aims at gauging the effects on financial markets, the banking sector, and lending to non-financial firms. Using a structural vector autoregression analysis, we find a positive effect on output and, after some delay, also on prices in Germany. At the same time, financial stress increases significantly, driven by stock market volatility, higher liquidity premiums and contagion risks. Bank lending in Germany and in the euro area periphery expands, even though borrowing does not become cheaper. This might indicate that more credit is extended to riskier borrowers.
Keywords: Asset purchase programs; Balance sheet; Monetary policy; Central bank; Shock identification; VAR (search for similar items in EconPapers)
JEL-codes: C32 E44 E52 E58 (search for similar items in EconPapers)
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Working Paper: The financial market effects of the ECB's asset purchase programs (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:43:y:2019:i:c:p:40-52
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