Monetary policy transmission to Russia & Eastern Europe

Carsten M. Stann and Theocharis Grigoriadis

No 2019/6, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: In this paper, we argue that the ECB's unconventional monetary policy announcements have generated significant spillover effects in Russia and Eastern Europe. The hypothesis is tested using OLS estimations of event-based regressions on monetary policy event dummies and seven financial variables in eleven East European countries including Russia. Overall, the empirical results associate the ECB's unconventional policy announcements with the appreciation of East European currencies, rising stock market indices as well as falling long-term government bond yields and lower sovereign CDS spreads in Eastern Europe and Russia. Notably, bilateral integration with the eurozone is a key determinant of the strength of spillovers, with spillovers strongest in non-euro EU countries and weakest in non-EU East European countries. Interestingly, we find differentiated strength of spillovers to Russia compared to other non-EU East European countries, which we attribute to its fixed exchange rate regime. Lastly, we test for the presence of the portfolio rebalancing and confidence transmission channels.

Keywords: monetary policy transmission; spillovers; European Central Bank; transmission channels; Eastern Europe; Russia (search for similar items in EconPapers)
JEL-codes: E52 E58 F34 F37 F42 P51 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-cba, nep-cis, nep-eec, nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:20196

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