The financial market effects of the ECB’s balance sheet policies

Vivien Lewis and Markus Roth ()

No 510356, Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: The European Central Bank’s balance sheet policies have been criticized as ineffective or even harmful to the economy. 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 that balance sheet innovations help to decrease financial stress, stock market risk and default rates initially. However, these beneficial effects on financial markets are overturned in the medium run. Credit expands significantly and persistently. While output rises immediately, the positive effect is short-lived and economically small. Prices do not respond significantly to the shock.

Date: 2015-10
Note: paper number DPS 15.20
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Citations: View citations in EconPapers (6)

Published in CES - Discussion paper series,, pages 1-30

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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:510356

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