Volatility spillovers of Federal Reserve and ECB balance sheet expansions to emerging market economies
Apostolos Apostolou and
John Beirne ()
No 2044, Working Paper Series from European Central Bank
This paper examines volatility spillovers from changes in the size of the balance sheets of the Federal Reserve FED) and European Central Bank (ECB) to emerging market economies (EMEs) from 2003 to 2014. We ﬁnd that EME bond markets are most susceptible to positive volatility spillovers from both the FED and ECB in terms of magnitude. Positive volatility spillovers to EME currency markets are higher in the case of FED balance sheet expansions than those of the ECB by a factor of about ten. By contrast, we ﬁnd that EME stock markets are subject to negative volatility spillovers. Moreover, we ﬁnd only limited evidence of volatility transmission to the real economy of EMEs following the monetary policy actions of the FED and ECB. Finally, we show that the proportion of the volatility in EMEs that is accounted for by changes in FED and ECB balance sheets shifts over time. JEL Classification: F3, F4, F16, G1
Keywords: central bank balance sheets; financial markets; unconventional monetary policy; volatility spillovers (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20172044
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