ECB’s Unconventional Monetary Policy and Cross-Financial-Market Correlation Dynamics
The North American Journal of Economics and Finance, Volume 50, November 2019
Posted: 5 Sep 2019
Date Written: August 28, 2019
This paper examines the effects of the unconventional monetary policy (UMP) launched by the European Central Bank on the cross-market correlations between bond, stock and currency forward markets. Using a dynamic conditional correlation analysis and several robustness tests, we investigate possible differences on the correlation dynamics across four UMP periods and across a range of developed countries and emerging market economies. The empirical results indicate a spillover effect on both developed and emerging markets, although this impact is not identical across assets and countries. We also find that the new UMP phase started in 2014 has a more prominent impact, highlighting differences on the impact between the earlier and the new wave of UMPs and across cross-market correlations.
Keywords: Unconventional monetary policy, Financial markets, Developed and emerging countries, Correlations, Wavelet analysis
JEL Classification: E52, G10, G15
Suggested Citation: Suggested Citation