Shutting Down of the Quantitative Easing Programme by European Central Bank as a Threat to the Market Cost of Capital Among Less Credible Eu Member States

Abstract

The ongoing process of shutting down the QE programme by ECB and possible reduction of its balance sheet might result in rapid corrections in the capital cost and the occurrence of the sudden stop phenomenon in the case of countries that are less credible and strongly depending on external sources of financing, thus more sensitive and less resistant towards external shocks, i.e. in countries which are the greatest beneficiaries of risk underestimation in the case of unprecedented increase in global liquidity made by major central banks after the crisis of 2008. This threat is essentially related to Poland as, apart from strong dependence from external capital which is necessary to finance the process of developmental catch-up and rolling over of the dynamically growing both public and private debt, which is additionally increased by lack of membership in the Eurozone; this is reflected in lower ratings or market cost of capital which suppress developmental possibilities of Polish economy and contribute to faster debt accumulation.

Globalization in Growing Financial Markets as a Threat to the Financial Security of the Global Economy

“…Although this issue concerns all countries, it is especially important in developing countries that heavily depend on external financing, as they are naturally more sensitive to shocks (Redo, 2017c). It must be stressed that also the exit from monetary policy stimulus by major central banks might lead to capital outflows from emerging economies and steep corrections in the estimation of assets, currencies, and cost of capital (Redo, 2017d;IMF, 2013).…”