Global Financial Market Impact of the Announcement of the ECB's Extended Asset Purchase Programme

Abstract

We estimate the impact of the ECB's announcement of the extended asset purchase programme (EAPP) on 22 January 2015 on global equity prices, bond yields and the euro exchange rate. We find that the EAPP announcement benefited global financial markets by boosting equity prices in the euro area and the rest of the world. At the same time, the EAPP announcement caused a depreciation of the euro vis-à-vis advanced and emerging market economy currencies. Comparing the EAPP to previous ECB announcements of unconventional monetary policies, the main channel of transmission of the EAPP announcement to global financial markets was through signalling-the ECB convincingly conveying to market participants that its future monetary policy stance will remain accommodative-rather than through improving confidence (as was the case for the OMT) or through portfolio re-balancing (as for the SMP). Similarly, in contrast to the OMT and the SMP announcements the signaling channel also played a major role for the domestic financial market impact of the EAPP. Cross-country heterogeneities in the global financial market spillovers from the EAPP announcement were linked to differences in economies' financial openness, exchange rate regime, trade and financial integration with the euro area and their attractiveness for carry trades.

Spillovers of the ECB's non-standard monetary policy into CESEE economies

“…They find that the ECB's non-standard policies impacted positively on global equity markets and confidence, lowering credit risk among banks and sovereigns in both AEs and EMEs; however, the ECB's measures seem to lead to an international portfolio rebalancing of a much more limited size in the short term than the Fed's policies did. Georgiadis and Gräb (2015) estimate the global impact of one of the latest ECB non-standard policies -i.e. the Expanded Asset Purchase Programme (EAPP), launched in January 2015 -on global equity prices, nominal exchange rates vis-à-vis the euro and bond yields.…”

Policy Mix and the US Trade Balance

“…A few studies have investigated spillovers from UMP in Europe. See, for example,Fratzscher and others (2014), andGeorgiadis and Grab (2015).©International Monetary Fund. Not for Redistribution…”

The effects of expanded asset purchase programme on inflation in the eurozone

“…Сама најава Проширеног програма куповине средстава утицала је на глобална финансијска тржишта тако што је повећала цене капитала у еврозони и остатку света, а истовремено је изазвала и депресијацију евра (Georgiadis, Grab, 2015) Савет ЕЦБ ће задржати контролу над кључним одредницама и карактеристикама програма као и вршење координације саме куповине, чиме ће се очувати јединство надлежности над монетарном политиком Еврозоне. Евросистем ће искористити децентрализацију спровођења за мобилизацију веће количине ресурса.…”