EconPapers    
Economics at your fingertips  
 

Sudden stops and asset purchase programmes in the euro area

Josefina Fabiani, Michael Fidora, Ralph Setzer (), Andreas Westphal and Nico Zorell

No 2597, Working Paper Series from European Central Bank

Abstract: This paper analyses the incidence and severity of sudden stops in euro area countries before and after the introduction of the ECB’s asset purchase programmes. We define sudden stops as abrupt declines in private net financial inflows, i.e. total flows adjusted for EU and IMF loans and changes in TARGET2 balances. Distinguishing between mild and severe sudden stops, we document that sudden stops were overall more frequent and more severe in euro area countries compared to other OECD economies over the period 1999–2020. On the basis of a multinomial logit model, we find that the susceptibility of euro area countries to severe sudden stops mainly reflects domestic fundamentals whereas there is no clear evidence of an adverse direct effect of being part of the euro area. On the contrary, TARGET2 appears to act as an “automatic stabiliser”, counteracting sudden stops in private financial i nflows. Moreover, our econometric analysis suggests that the asset purchase programmes implemented by the ECB since 2015 have overall almost halved the risk of severe sudden stops in euro area countries. We find tentative evidence that this effect operates through confidence channels. JEL Classification: F21, F31, F32, F41, F45

Keywords: ECB asset purchase programmes; financial flows; monetary policy; sudden stops (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
Note: 491968
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2597~03358dce12.en.pdf (application/pdf)

Related works:
Journal Article: Sudden Stops and Asset Purchase Programmes in the Euro Area (2021) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20212597

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().

 
Page updated 2022-10-22
Handle: RePEc:ecb:ecbwps:20212597