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Asset price volatility in EU-6 economies: how large is the role played by the ECB?

Alessio Ciarlone () and Andrea Colabella ()
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Alessio Ciarlone: Banca d'Italia

No 1175, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: In this paper we provide evidence that the effects of the different waves of asset purchase programmes implemented by the ECB from 2009 onwards have spilled over into asset price volatility developments of a group of six Central and Eastern European economies belonging to the EU but not to the euro area. This has partly shielded their financial markets from the negative shocks that have influenced international investors’ degree of risk aversion in recent years. By means of a dynamic conditional correlation multivariate GARCH model, and by resorting to three different proxies to describe the functioning and measure the impact of the ECB’s asset purchase programmes, we show that such non-standard monetary measures have played a significant role in dampening volatility spikes in the financial markets of the countries at stake. This probably reflects how both a ‘risk taking’ and a ‘liquidity’ channel of transmission actually work. The results are generally robust to an extensive series of tests, and to changes made in the estimation methodology.

Keywords: unconventional monetary policy; ECB; Central and Eastern Europe; international spillovers; asset prices; volatility; GARCH models (search for similar items in EconPapers)
JEL-codes: C32 E52 E58 F3 F4 F16 F37 G1 G11 G14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-ets and nep-mon
Date: 2018-06
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1175_18

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