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

See all articles by Dimitris Kenourgios

Dimitris Kenourgios

National and Kapodistrian University of Athens - Department of Economics

Emmanouela Drakonaki

National and Kapodistrian University of Athens - Department of Economics

Dimitrios I. Dimitriou

National and Kapodistrian University of Athens; University of Ioannina - Department of Economics

Date Written: August 28, 2019

Abstract

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

Kenourgios, Dimitris and Drakonaki, Emmanouela and Dimitriou, Dimitrios I., ECB’s Unconventional Monetary Policy and Cross-Financial-Market Correlation Dynamics (August 28, 2019). The North American Journal of Economics and Finance, Volume 50, November 2019. Available at SSRN: https://ssrn.com/abstract=3444523

Dimitris Kenourgios (Contact Author)

National and Kapodistrian University of Athens - Department of Economics ( email )

1, Sofokleous Str
Office 521
Athens, 10559
Greece
+30 210 3689449 (Phone)

Emmanouela Drakonaki

National and Kapodistrian University of Athens - Department of Economics ( email )

1, Sofokleous Str
Athens, GR- 10559
Greece

Dimitrios I. Dimitriou

National and Kapodistrian University of Athens ( email )

Department of Economics
Athens
Greece

University of Ioannina - Department of Economics ( email )

45110 Ioannina
Greece

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