The Effect of ECB's Quantitative Easing on Credit Default Swap Instruments in Central and Eastern Europe

Albu, Lucian-Liviu; Lupu, Radu; Călin, Adrian Cantemir; Popovici, Oana Cristina

doi:10.1016/s2212-5671(14)00071-9

Cited by 4 publications

(1 citation statement)

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“…Therefore the Federal Reserve Bank's (Fed) decision has contributed to greater capital flows (Serin & Oktay, 2013). Following the Fed, Bank of Canada and European Central Bank started to apply similar unconventional measures in order to maintain monetary flows and market stability (Albu et al, 2014) After the 2007-2008 global financial crisis the Fed began to apply an unconventional monetary policy in order to stimulate the economy while keeping the interest rates record low. Fed launched a new set of non-standard policy tools which have been known as Quantitative Easing policies (QE).…”

Section: Introductionmentioning

confidence: 99%

The Spillover Effects of Fedâ€™s Policies with Emphasis to the Fragile Five

Orhan¹,

Çelikel²

2014

JEBS

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Since the Bretton Woods Agreement, the U.S. dollar has played the role of dominant global currency. As a result, the Federal Reserve Bank has many privileges such as the ability to run trade deficits without foreign exchange reserves. In the world, foreign exchange rates of currencies are quoted against the dollar, and majority of currency trading involves the dollar. Besides, international trade in primary commodities, such as oil, wheat, gold and coffee are bought and sold in U.S. dollar. The central banks of countries hold major positions of their international reserves in dollars. Any changes in its interest rates automatically alter the revenues of all world assets. With deregulated financial markets, the spillover effects of the Federal Reserve Bank's decisions have increased. In this paper, we examine the impacts of Federal Reserve Bank policies over the Fragile Five that is a sub group of the weaker emerging markets namely Brazil, India, Indonesia, South Africa and Turkey. We are mainly focusing on the consequences of changes in Fed's policies on the fragile five's basic indicators; exchange rate, interest rate, and the stock exchange indices. All Fragile Five currencies have been depreciated by about 10 to 25% after the Fed tapering decisions. In addition we test for mean and volatility spillover of Wall Street on stock exchange indices of the Fragile Five in GARCH in mean framework and document the existence of such spillovers in almost all cases.

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Section: Introductionmentioning

confidence: 99%